**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


__________________________




**FORM** **10-Q**


__________________________




**þ**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the quarterly period ended June 30, 2008**




or




**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the transition period from**  **to**




**Commission
      file number: 001-02292**


_______________________________________




**NYFIX,
      INC.**


**(Exact
      name of registrant as specified in its charter)**





**Delaware**
              **(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            **06-1344888**
              **(I.R.S.
                Employer**
              **Identification
                Number)****100
                Wall Street**
              **New
                York, New York**
              **(Address
                of principal executive offices)**
            **10005**
              **(Zip
                code)**




**(646)
      525-3000**


**(Registrant’s
      telephone number, including area code)**


_______________




Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.  Yes  x  No  o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
                accelerated Filer ̈
            Accelerated
                filerý
            Non-accelerated
                filer ̈
            Smaller
                reporting company ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o No x




There
      were 38,024,934 shares of our common stock outstanding on August 4,
      2008.















**TABLE
      OF CONTENTS**




**Page****PART
                I - FINANCIAL INFORMATION****Item
                1.**
            
            **Unaudited
                Financial Statements**
            **4**Condensed
                Consolidated Balance Sheets as of June 30, 2008 and December 31,
                2007
            4Condensed
                Consolidated Statements of Operations for the Three and Six Months
                Ended
                June 30, 2008 and 2007
            5Condensed
                Consolidated Statement of Changes in Stockholders’ Equity and
                Comprehensive Loss for the Six Months Ended June 30, 2008
            6Condensed
                Consolidated Statements of Cash Flows for the Six Months Ended June
                30,
                2008 and 2007
            7Notes
                to Condensed Consolidated Financial Statements
            8**Item
                2.**
            
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations**
            **19****Item
                3.**
            
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            **32****Item
                4.**
            
            **Controls
                and Procedures**
            **32**


**PART
      II - OTHER INFORMATION**


**Item
                1.**
            
            **Legal
                Proceedings**
            **33****Item
                1A.**
            
            **Risk
                Factors**
            **33****Item
                2.**
            
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**
            **34****Item
                3.**
            
            **Defaults
                Upon Senior Securities**
            **34****Item
                4.**
            
            **Submission
                of Matters to a Vote of Security Holders**
            **34****Item
                5.**
            
            **Other
                Information**
            **34****Item
                6.**
            
            **Exhibits**
            **35****Signatures**
            **36**





Page
            2




**PRELIMINARY
      NOTES**




When
      we
      use the terms “NYFIX”, the “Company”, “we”, “us” and “our”, we mean NYFIX, Inc.
      and its consolidated subsidiaries.




**Forward
      Looking Statements**




This
      quarterly report on Form 10-Q contains statements that constitute
“forward-looking statements” within the meaning of the safe harbor provisions of
      The Private Securities Litigation Reform Act of 1995. In some cases, you can
      identify these statements by forward-looking words such as “may,” “might,”
“will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “potential” or “continue,” and the negative of these terms and other
      comparable terminology. These forward-looking statements, which are subject
      to
      known and unknown risks, uncertainties and assumptions about us, may include
      projections of our future financial performance based on our growth strategies
      and anticipated trends in our business. These statements are only predictions
      based on our current expectations and projections about future events. There
      are
      important factors that could cause our actual results, level of activity,
      performance or achievements to differ materially from the results, level of
      activity, performance or achievements expressed or implied by the
      forward-looking statements. In particular, you should consider the numerous
      risks and uncertainties described under Part I Item 1A. - Risk Factors in
      our Annual Report on Form 10-K filed for the fiscal year ended December 31,
      2007
      (“2007 Form 10-K”).




These
      risks and uncertainties are not exhaustive. Other sections of the 2007 Form
      10-K
      and of this report describe additional factors that could adversely impact
      our
      business and financial performance. Moreover, we operate in a very competitive
      and rapidly changing environment. New risks and uncertainties emerge from time
      to time, and it is not possible to predict all risks and uncertainties, nor
      can
      we assess the impact of all factors on our business or the extent to which
      any
      factor, or combination of factors, may cause actual results to differ materially
      from those contained in any forward-looking statements.




Although
      we believe the expectations reflected in the forward-looking statements are
      reasonable, we cannot guarantee future results, level of activity, performance
      or achievements. Moreover, neither we nor any other person assumes
      responsibility for the accuracy or completeness of any of these forward-looking
      statements. You should not rely upon forward-looking statements as guarantees
      of
      future events. We disclaim any duty to update any of these forward-looking
      statements after the filing of this report to conform our prior statements
      to
      actual results or revised expectations and we do not intend to do so, and these
      forward-looking statements should not be relied upon as representing our views
      as of any date subsequent to the filing of this report.




Forward-looking
      statements include, but are not limited to, statements about:





·
            the
                impact of recording a significant impairment charge relating to goodwill
                due to the fact that we have not been
                profitable;


·
            the
                effects of current, pending and future legislation;


·
            the
                impact of regulation and regulatory actions;


·
            our
                ability to achieve and maintain effective internal control over financial
                reporting in accordance with Securities and Exchange Commission (“SEC”)
                rules promulgated under Section 404 of the Sarbanes-Oxley Act of
                2002 (the
                “Sarbanes-Oxley Act”);


·
            the
                impact of accounting for stock-based compensation and ongoing regulatory
                investigations, including the possibility of new and significant
                information subsequently arising which could lead to different
                determinations and require different accounting treatment;


·
            actions
                and initiatives by both current and future competitors;


·
            our
                ability to accommodate increased levels of trading activity and keep
                current with market data
                requirements;


·
            our
                business’ possible or assumed future results of operations and cash
                flows;


·
            our
                business’ competitive position;


·
            potential
                growth opportunities available to our
                business;


·
            the
                likelihood of success and impact of
                litigation;


·
            our
                expectation with respect to securities markets and general economic
                conditions; and


·
            our
                ability to keep up with rapid technological
                change.




We
      expressly qualify in their entirety all forward-looking statements attributable
      to us or any person acting on our behalf by the cautionary statements contained
      or referred to in this section.





Page
            3





**** **PART
      I - FINANCIAL INFORMATION**





**Item
      1. Unaudited Financial Statements**


**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Balance Sheets**


**(in
      thousands, except share and per share amounts)**





**June 30,**
            
            **December 31,****2008**
            
            **2007****(Unaudited)**
            
            **(Audited)****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            52,178
            
            $
            75,657Accounts
                receivable, less allowances of $169 and $282, respectively
            
            
            12,901
            
            
            14,609Clearing
                assets
            
            
            538,410
            
            
            483,867Prepaid
                expenses and other current assets
            
            
            5,045
            
            
            7,900Total
                current assets
            
            
            608,534
            
            
            582,033Property
                and equipment, net of accumulated depreciation and amortization of
                $41,186
                and $37,838, respectively
            
            
            21,848
            
            
            21,478Capitalized
                software development costs, net of accumulated amortization of $16,464
                and
                $15,755, respectively
            
            
            7,017
            
            
            5,789Goodwill
            
            
            58,407
            
            
            57,401Acquired
                intangible assets, net of accumulated amortization of $11,215 and
                $10,967,
                respectively
            
            
            9,569
            
            
            3,708Other
                assets, net
            
            
            601
            
            
            1,745Total
                assets
            
            $
            705,976
            
            $
            672,154**Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            31,423
            
            $
            39,163Clearing
                liabilities
            
            
            533,029
            
            
            483,600Current
                portion of capital lease obligations
            
            
            536
            
            
            923Current
                portion of other long-term liabilities
            
            
            935
            
            
            1,564Deferred
                revenue
            
            
            4,545
            
            
            4,648Total
                current liabilities
            
            
            570,468
            
            
            529,898Long-term
                portion of capital lease obligations
            
            
            311
            
            
            550Long-term
                debt
            
            
            9,956
            
            
            9,941Other
                long-term liabilities
            
            
            1,415
            
            
            2,354Total
                liabilities
            
            
            582,150
            
            
            542,743Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, $1.00 par value; 5,000,000 shares authorized:Series
                A, none issued
            
            
            -
            
            
            -Series
                B Voting Convertible, 1,500,000 shares issued and outstanding; liquidation
                preference of $75,000 at June 30, 2008
            
            
            62,092
            
            
            62,092Series
                C Non-Voting Convertible, none issued
            
            
            -
            
            
            -Common
                stock, $0.001 par value; 100,000,000 shares authorized; 38,954,354
                and
                37,725,758 shares issued, respectively
            
            
            268,251
            
            
            261,307Preferred
                stock dividend distributable, 525,000 common shares at December 31,
                2007
            
            
            -
            
            
            2,441Accumulated
                deficit
            
            
            (193,748
            )
            
            (183,232
            )Treasury
                stock, 923,108 and 906,826 shares, respectively, at cost
            
            
            (12,600
            )
            
            (13,194
            )Accumulated
                other comprehensive loss
            
            
            (169
            )
            
            (3
            )Total
                stockholders' equity
            
            
            123,826
            
            
            129,411Total
                liabilities and stockholders' equity
            
            $
            705,976
            
            $
            672,154





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.





Page
            4





**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Statements of Operations (Unaudited)**


**(in
      thousands, except per share amounts)**





**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007****Revenue:**Subscription
                and maintenance
            
            $
            17,507
            
            $
            16,471
            
            $
            35,025
            
            $
            33,745Transaction
            
            
            10,831
            
            
            13,592
            
            
            24,099
            
            
            23,368Product
                sales and services
            
            
            284
            
            
            695
            
            
            905
            
            
            1,375Total
                revenue
            
            
            28,622
            
            
            30,758
            
            
            60,029
            
            
            58,488**Cost
                of revenue:**Subscription
                and maintenance
            
            
            7,821
            
            
            8,369
            
            
            15,472
            
            
            16,915Transaction
            
            
            5,642
            
            
            8,359
            
            
            12,054
            
            
            13,760Product
                sales and services
            
            
            87
            
            
            206
            
            
            168
            
            
            593Total
                cost of revenue
            
            
            13,550
            
            
            16,934
            
            
            27,694
            
            
            31,268**Gross
                profit**
            
            
            15,072
            
            
            13,824
            
            
            32,335
            
            
            27,220**Operating
                expense:**Selling,
                general and administrative
            
            
            20,224
            
            
            20,351
            
            
            40,620
            
            
            37,229Integration
                charges
            
            
            596
            
            
            -
            
            
            596
            
            
            -Depreciation
                and amortization
            
            
            494
            
            
            378
            
            
            941
            
            
            660Restructuring
                charge
            
            
            374
            
            
            -
            
            
            216
            
            
            -SEC
                investigation, restatement and related expenses
            
            
            131
            
            
            1,392
            
            
            268
            
            
            4,985Loss
                from operations
            
            
            (6,747
            )
            
            (8,297
            )
            
            (10,306
            )
            
            (15,654
            )Interest
                expense
            
            
            (155
            )
            
            (126
            )
            
            (366
            )
            
            (262
            )Investment
                income
            
            
            230
            
            
            1,097
            
            
            776
            
            
            2,324Other
                income (expense), net
            
            
            -
            
            
            3
            
            
            -
            
            
            (12
            )Loss
                before income tax provision
            
            
            (6,672
            )
            
            (7,323
            )
            
            (9,896
            )
            
            (13,604
            )Income
                tax provision
            
            
            127
            
            
            47
            
            
            255
            
            
            94Net
                loss
            
            
            (6,799
            )
            
            (7,370
            )
            
            (10,151
            )
            
            (13,698
            )Accumulated
                preferred dividends
            
            
            (827
            )
            
            (1,709
            )
            
            (1,969
            )
            
            (3,426
            )Loss
                applicable to common stockholders
            
            $
            (7,626
            )
            $
            (9,079
            )
            $
            (12,120
            )
            $
            (17,124
            )Basic
                and diluted loss per common share
            
            $
            (0.20
            )
            $
            (0.25
            )
            $
            (0.32
            )
            $
            (0.48
            )Basic
                and diluted weighted average common shares outstanding
            
            
            37,472
            
            
            35,901
            
            
            37,392
            
            
            35,833





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




Page
            5




**NYFIX,
        Inc. and Subsidiaries**
 **Condensed
        Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Loss
        (Unaudited)**
 **For
        the Six Months Ended June 30, 2008**
 **(in
        thousands, except share amounts)**
 
 **Series B Voting Convertible**
                **preferred stock issued**
              
              **Preferred stock**
                **dividend**
              **Common stock****issued**
              
              **Accumulated**
              
              **Treasury**
              
              **Accumulated**
                **other**
                **comprehensive**
              
              **Total**
                **stockholders’****Shares**
              
              **Amount**
              
              **distributable**
              **Shares**
              
              **Amount**
              
              **deficit**
              ****
              **stock**
              ****
              **loss**
              ****
              **equity**Balance December 31,
                  2007
              
              1,500,000
              
              $
              62,092
              
              $
              2,441
              
              37,725,758
              
              $
              261,307
              
              $
              (183,232
              )
              $
              (13,194
              )
              $
              (3
              )
              $
              129,411Comprehensive
                  loss:Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              -
              
              
              (10,151
              )
              
              -
              
              
              -
              
              
              (10,151
              )Foreign
                  currency translation adjustment
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (166
              )
              
              (166
              )Total
                  comprehensive loss
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (10,317
              )Issuance
                  of common stock for restricted stock units settled in
                  shares
              
              -
              
              
              -
              
              
              -
              
              178,596
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Common
                  shares issued in payment of preferred stock dividend
              
              -
              
              
              -
              
              
              (2,441
              )
              1,050,000
              
              
              2,441
              
              
              -
              
              
              -
              
              
              -
              
              
              -Issuance
                  of shares from treasury stock pursuant to employment
                  agreement
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              (300
              )
              
              (365
              )
              
              665
              
              
              -
              
              
              -Purchase
                  of treasury shares (16,282 shares)
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              -
              
              
              -
              
              
              (71
              )
              
              -
              
              
              (71
              )Contingent
                  conversion price adjustment related to convertible notes
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              15
              
              
              -
              
              
              -
              
              
              -
              
              
              15Stock-based
                  compensation expense
              
              -
              
              
              -
              
              
              -
              
              -
              
              
              4,788
              
              
              -
              
              
              -
              
              
              -
              
              
              4,788Balance
                  June 30, 2008
              
              1,500,000
              
              $
              62,092
              
              $
              -
              
              38,954,354
              
              $
              268,251
              
              $
              (193,748
              )
              $
              (12,600
              )
              $
              (169
              )
              $
              123,826


Page
          6




**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Statements of Cash Flows (Unaudited)**


**(in
      thousands)**





**Six Months Ended**
              **June 30,****2008**
            
            **2007**Operating activities:Net
                loss
            
            $
            (10,151
            )
            $
            (13,698
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            4,929
            
            
            5,382Restructuring
                charge
            
            
            216
            
            
            -Integration
                charge
            
            
            502
            
            
            -Stock-based
                compensation expense
            
            
            4,788
            
            
            235Amortization
                of debt discounts and premiums
            
            
            29
            
            
            20Deferred
                income taxes
            
            
            97
            
            
            74Recovery
                of doubtful accounts
            
            
            (56
            )
            
            -Other,
                net
            
            
            -
            
            
            1Changes
                in assets and liabilities:Accounts
                receivable
            
            
            1,890
            
            
            (4,198
            )Clearing
                assets
            
            
            (54,547
            )
            
            29,475Prepaid
                expenses and other assets
            
            
            1,669
            
            
            (526
            )Deferred
                revenue
            
            
            (158
            )
            
            (62
            )Accounts
                payable, accrued expenses and other liabilities
            
            
            (2,709
            )
            
            1,495Clearing
                liabilities
            
            
            49,429
            
            
            (31,398
            )Net
                cash used in operating activities
            
            
            (4,072
            )
            
            (13,200
            )Investing
                activities:Capital
                expenditures for property and equipment
            
            
            (3,978
            )
            
            (5,057
            )Capitalization
                of software development costs
            
            
            (2,805
            )
            
            (1,795
            )Tax
                benefit attributable to goodwill
            
            
            158
            
            
            20Payment
                for acquisition of minority interests
            
            
            (7,042
            )
            
            -Payment
                for acquisition, net of cash received
            
            
            (6,946
            )
            
            -Proceeds
                from sale of discontinued operations, net
            
            
            2,066
            
            
            -Net
                cash used in investing activities
            
            
            (18,547
            )
            
            (6,832
            )Financing
                activities:Principal
                payments under capital lease obligations
            
            
            (626
            )
            
            (541
            )Purchases
                of treasury shares
            
            
            (71
            )
            
            -Other,
                net
            
            
            (130
            )
            
            (184
            )Net
                cash used in financing activities
            
            
            (827
            )
            
            (725
            )Effect
                of exchange rate changes on cash
            
            
            (33
            )
            
            79Net
                decrease in cash and cash equivalents
            
            
            (23,479
            )
            
            (20,678
            )Cash
                and cash equivalents, beginning of period
            
            
            75,657
            
            
            105,888Cash
                and cash equivalents, end of period
            
            $
            52,178
            
            $
            85,210





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.





Page
            7


Notes
        to
        Condensed Consolidated Financial Statements (Unaudited)


**1.**  **Summary
      of Significant Accounting Policies**




*Nature
      of Operations*




NYFIX,
      Inc., together
      with its consolidated subsidiaries, provides electronic trading services
      including trading workstations, trade messaging software and trade messaging
      services to domestic and international market participants. In addition, NYFIX’s
      registered broker-dealer subsidiaries also provide automated trade execution
      services to institutional counterparties and operate a matched-book stock
      borrow/stock loan business.




The
      Company’s headquarters and principal offices are in New York, NY. The Company
      also has offices in London, Hong Kong, Boston, MA, and Lyndhurst, NJ. The
      Company operates redundant data centers in the northeastern United States,
      as
      well as data center hubs in London and Amsterdam.




*Basis
      of Presentation of Interim Financial Statements*




The
      accompanying unaudited condensed consolidated financial statements were prepared
      by the Company pursuant to the rules and regulations of the Securities and
      Exchange Commission (the “SEC”) and, in the opinion of management, include all
      adjustments (consisting of normal recurring accruals and adjustments necessary
      for adoption of new accounting standards) necessary to present fairly the
      results of the interim periods shown. Certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with U.S. generally accepted accounting principles (“GAAP”) have been condensed
      or omitted pursuant to such SEC rules and regulations. Management believes
      that
      the disclosures made are adequate to make the information presented not
      misleading. The results for the interim periods are not necessarily indicative
      of results for the full year. The financial statements contained herein should
      be read in conjunction with the consolidated financial statements and notes
      thereto included in the 2007 Form 10-K.




The
      accompanying unaudited condensed consolidated financial statements include
      the
      accounts of NYFIX, Inc. and its majority-owned and wholly-owned subsidiaries.
      All significant intercompany balances and transactions have been eliminated
      in
      consolidation.




*Significant
      Accounting Policies*




There
      have been no material changes in the Company’s significant accounting policies
      during 2008, as compared to what was previously disclosed in the 2007 Form
      10-K.




**2.
      Equity Incentive Plans**




The
      Company has stock-based incentive plans under which time-based and
      performance-based stock options and restricted stock units (“RSUs”) have been
      granted to employees and non-employee members of the Board of Directors.
      Generally, these options and RSUs vest over a period of four years and are
      forfeited, except in certain circumstances, in the event the employee or
      director terminates his or her employment or relationship with the Company.
      Stock options expire in ten years.




The
      fair
      value of options is estimated using the Black-Scholes option-pricing model
      which
      considers, among other factors, the expected life of the award and the expected
      volatility of the Company’s stock price. Although the Black-Scholes model meets
      the requirements of Statement of Financial Accounting Standards (“SFAS”) 123
      (revised 2004), *Share-Based
      Payment* and
      Staff Accounting Bulletin No. 107, *Share-Based
      Payment* ,
      the
      fair values generated by the model may not be indicative of the actual fair
      values of the Company’s awards, as it does not consider other factors important
      to those stock-based compensation awards, such as continued employment, periodic
      vesting requirements, and limited transferability.




Page
          8


Notes
        to
        Condensed Consolidated Financial Statements
        - continued (Unaudited)


*Time-based
      Stock Option Awards*




A
      summary
      of activity under time-based stock option plans for the six months ended June
      30, 2008, follows:




**Options**
            
            **Shares**
            
            **Weighted**
              **average**
              **exercise**
              **price**
            
            **Weighted**
              **average**
              **remaining**
              **contractual**
              **term (years)**
            
            **Aggregate**
              **Intrinsic**
              **value (in**
              **thousands)**Outstanding at
                beginning of the year
            
            
            8,739,684
            
            $
            5.98Granted
            
            
            1,141,117
            
            $
            3.90Exercised
            
            
            -
            
            
            -Cancelled
            
            
            (487,939
            )
            $
            5.21Outstanding
                at end of the period
            
            
            9,392,862
            (1)
            $
            5.77
            
            
            8.4
            
            $
            170Exercisable
                at end of the period
            
            
            3,993,415
            (1)
            $
            7.55
            
            
            7.2
            
            $
            80





(1)
      Includes awards covering 6,734 shares related to pending exercises not yet
      settled. The weighted average exercise price for such shares approximates $3.41
      per share.




*Time-Based
      RSUs*




A
      summary
      of activity under time-based restricted stock units for the six months ended
      June 30, 2008, follows:


**Restricted Stock Units**
            
            **Shares**
            
            **Weighted**
              **average grant**
              **date fair value**
            
            **Aggregate**
              **intrinsic value**
              **(in thousands)**
              **(1)**Outstanding at
                beginning of the year
            
            
            768,250
            
            $
            4.60Granted
            
            
            205,066
            
            $
            3.81Settled
                with shares
            
            
            (178,596
            )
            $
            4.45
            
            $
            696Cancelled
            
            
            (87,062
            )
            $
            4.59Outstanding
                at end of the period
            
            
            707,658
            
            $
            4.40





(1)
      Represents the value of NYFIX stock on the date that the restricted stock units
      vested.


On
      grant
      date the fair value for these vested awards was $794,000.




Page
          9


Notes
        to
        Condensed Consolidated Financial Statements
        - continued (Unaudited)




*Performance-based
      Awards*




A
      summary
      of activity under performance-based stock option plans for the six months ended
      June 30, 2008, follows:


**Options**
              
              **Shares**
              
              **Weighted**
                **average**
                **exercise price**
              
              **Weighted**
                **average**
                **remaining**
                **contractual**
                **term (years)**
              
              **Aggregate**
                **intrinsic**
                **value (in**
                **thousands)**Outstanding at beginning
                  of the year
              
              
              1,428,855
              
              $
              4.60Granted
              
              
              300,000
              
              $
              3.85Exercised
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -Outstanding
                  at end of the period
              
              
              1,728,855
              
              $
              4.47
              
              
              9.3
              
              $
              30Exercisable
                  at end of the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -




In
      addition, during 2007, 350,000 performance-based RSUs were granted.
      Performance-based stock options and performance-based RSUs are eligible to
      be
      earned (in amounts ranging from 0% to 100% of the award) in equal pro rata
      installments over four one-year performance periods based on the achievement
      of
      annual goals for revenue and operating earnings before interest, taxes,
      depreciation and amortization. Any portion of RSUs not earned in years one
      through three is eligible to be earned in year four based on the achievement
      of
      goals in year four. The 2007 goals were not met and no performance-based RSUs
      were earned in 2007.




During
      2008, no additional performance-based RSUs have been granted.




*Stock-based
      Compensation Expense*




Stock-based
      compensation expense during the three and six months ended June 30, 2008 was
      approximately $2.0 million and $4.8 million, respectively. During the three
      and
      six months ended June 30, 2007 stock-based compensation expense, including
      the
      portion recorded in SEC investigation, restatement and related expenses, was
      approximately $0.3 million and $0.4 million, respectively.




As
      of
      June 30, 2008, there were $17.2 million of unrecognized compensation costs
      related to outstanding awards. The Company expects to recognize these costs
      over
      a weighted average period of 1.5 years.




**3.
      Acquisitions and Dispositions**




*Acquisition
      of FIXCITY, Ltd.*




On
      April
      4, 2008, the Company acquired 100% of the outstanding stock of FIXCITY, Ltd.
      (“FIXCITY”), a U.K.-based specialist in web-based electronic trading and
      liquidity discovery solutions. This acquisition reflects the Company’s strategy
      to aggregate liquidity for clients and to provide real-time information to
      make
      trading decisions. This acquisition also enhances the Company’s strategy of
      global expansion by adding significantly to its international client base.
      The
      Company has included the operating results of FIXCITY in its consolidated
      financial statements since the date of acquisition.




Pursuant
      to the terms of the share purchase agreement, the Company paid £3.3 million (or
      approximately $6.6 million) in cash and also agreed to pay an additional $1.0
      million in cash contingent on the successful completion of the integration
      of
      the existing FIXCITY and NYFIX technology platforms within six months of the
      closing date. The Company incurred $0.7 million in legal and consulting fees
      related to this acquisition.




In
      addition, the share purchase agreement provides the potential for cash earn-out
      payments in years 1, 2 and 3 following the acquisition totaling up to £3.7
      million (or approximately $7.4 million) if certain revenue targets are achieved,
      with potential additional payments based on varying percentages of all such
      revenue if higher level target thresholds are achieved.




Page
          10


Notes
        to
        Condensed Consolidated Financial Statements - continued
        (Unaudited)




The
      purchase price for FIXCITY has been allocated to the assets acquired and
      liabilities assumed based on the fair values at the date of acquisition.




Assets:
            
            **(in thousands)**Current assets
                (including cash of $393)
            
            $
            527Fixed
                assets
            
            
            28Intangible
                assets
            
            
            6,194Goodwill
            
            
            1,181Total
                assets acquired
            
            
            7,930Liabilities:Current
                liabilities
            
            
            590Total
                liabilities assumed
            
            
            590Net
                assets acquired
            
            $
            7,340




Since
      the
      acquisition, the Company has incurred related integration costs. The integration
      costs incurred during the three and six months ended June 30, 2008 included
      a
      $0.5 million write-off of capitalized software replaced by acquired technology
      and $0.1 million of third party consulting costs to integrate the acquired
      technology platform.




*Sale
      of NYFIX Overseas, Inc.*




In
      August
      2006, the Company disposed of all of the issued and outstanding capital stock
      of
      NYFIX Overseas, Inc. (“NYFIX Overseas”) a former wholly-owned subsidiary which
      previously comprised the Company’s Order Book Management Systems (“OBMS”)
      Division to G.L.
      Trade S.A. (“GL”) .
      In June
      2008, the Company received payment of $2.1 million from GL in full settlement
      of
      the earn-out payment, net of amounts paid to the NYFIX Overseas management
      team.
      This earn-out was recognized in results of operations during the fourth quarter
      of 2007.




**4.
      Loss Per Share Applicable to Common Stockholders**




The
      following table sets forth the computations of loss per share applicable to
      common stockholders for the three and six months ended June 30, 2008 and 2007:




Page
          11


Notes
        to
        Condensed Consolidated Financial Statements
        - continued (Unaudited)


**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,**(in thousands, except per share amounts)
            
            **2008**
            
            **2007**
            
            **2008**
            
            **2007**Net loss
            
            $
            (6,799
            )
            $
            (7,370
            )
            $
            (10,151
            )
            $
            (13,698
            )Less:
                Accumulated preferred dividends
            
            
            (827
            )
            
            (1,709
            )
            
            (1,969
            )
            
            (3,426
            )Loss
                applicable to common stockholders, basic and diluted
            
            $
            (7,626
            )
            $
            (9,079
            )
            $
            (12,120
            )
            $
            (17,124
            )Basic
                and diluted loss per common share
            
            $
            (0.20
            )
            $
            (0.25
            )
            $
            (0.32
            )
            $
            (0.48
            )Weighted
                average common shares outstanding (1):Basic
                and diluted shares
            
            
            37,472
            
            
            35,901
            
            
            37,392
            
            
            35,833Potentially
                dilutive securities (2):Outstanding
                time-based stock options (3)
            
            
            9,393
            
            
            2,795
            
            
            9,393
            
            
            2,795Outstanding
                time-based restricted stock units (3)
            
            
            708
            
            
            -
            
            
            708
            
            
            -Warrants
                (3)
            
            
            2,250
            
            
            2,250
            
            
            2,250
            
            
            2,250Convertible
                notes (3)
            
            
            1,776
            
            
            1,327
            
            
            1,776
            
            
            1,327Convertible
                preferred stock (2)
            
            
            15,000
            
            
            15,000
            
            
            15,000
            
            
            15,000


(1)
        Excludes nonvested restricted stock and restricted stock units.


(2)
      Excludes performance-based grants as the necessary conditions have not been
      satisfied.


(3)
      The
      impact of time-based stock options, time-based restricted stock units, warrants,
      the convertible notes and the convertible
      preferred stock on earnings per shae is antidilutive in a period of
      loss.




**5.
      Other Balance Sheet Information**




Accounts
      payable and accrued expenses consisted of the following at June 30, 2008 and
      December 31, 2007:




**June 30,**
            
            **December 31,**(in thousands)
            
            **2008**
            
            **2007**Accounts
                payable
            
            $
            9,814
            
            $
            16,369Taxes,
                other than income and payroll taxes
            
            
            361
            
            
            439Compensation
                and related
            
            
            8,770
            
            
            12,629Deferred
                insurance proceeds (Note 11)
            
            
            10,000
            
            
            -Purchase
                price payable for minority interests
            
            
            231
            
            
            7,273Other
            
            
            2,247
            
            
            2,453Total
                accounts payable and accrued expenses
            
            $
            31,423
            
            $
            39,163




Page
          12


Notes
        to
        Condensed Consolidated Financial Statements
        - continued (Unaudited)


**6.
      Broker-Dealer Operations**




*Clearing
      Assets and Liabilities*




Clearing
      assets and liabilities consisted of the following at June 30, 2008 and December
      31, 2007:




**June
                30,**
            
            **December
                31,**(in
                thousands)
            
            **2008**
            
            **2007**Securities
                borrowed
            
            $
            530,245
            
            $
            480,884Securities
                failed-to-deliver
            
            
            4,111
            
            
            664Receivables
                from clearing organizations and firms
            
            
            2,482
            
            
            1,270Deposits
                with clearing organizations and others
            
            
            1,572
            
            
            1,049Total
                clearing assets
            
            $
            538,410
            
            $
            483,867Securities
                loaned
            
            $
            529,816
            
            $
            482,959Securities
                failed-to-receive
            
            
            3,203
            
            
            641Payables
                to clearing organizations and firms
            
            
            10
            
            
            -Total
                clearing liabilities
            
            $
            533,029
            
            $
            483,600




*Securities
      Lending*




The
      Company receives collateral under securities borrowed transactions, which it
      is
      allowed by contract or custom to sell or repledge. As of June 30, 2008,
      securities borrowed with a fair value of $512.5 million were repledged for
      securities loaned. The gross amounts of interest earned on cash provided to
      counterparties as collateral for securities borrowed and interest incurred
      on
      cash received from counterparties as collateral for securities loaned and the
      resulting net amount included in transaction revenue for the three and six
      months ended June 30, 2008 and 2007, were as follows:




**Three Months Ended**
            
            **Six Months Ended****June 30,**
            
            **June 30,**(in thousands)
            
            **2008**
            
            **2007**
            
            **2008**
            
            **2007**Interest earned
            
            $
            2,061
            
            $
            4,412
            
            $
            4,979
            
            $
            8,064Interest
                incurred
            
            
            (1,810
            )
            
            (4,059
            )
            
            (4,463
            )
            
            (7,400
            )Net
            
            $
            251
            
            $
            353
            
            $
            516
            
            $
            664




*Regulatory
      Net Capital Requirements*




*U.S.
      registered broker-dealer subsidiaries* - NYFIX
      Securities Corporation (“NYFIX Securities”) and NYFIX
      Millennium, L.L.C. (“NYFIX Millennium”) are
      subject to the SEC’s Uniform Net Capital Rule (15c3-1), which requires the
      maintenance of minimum regulatory net capital. NYFIX Securities has elected
      to
      use the alternative method, as permitted by the rule, which requires the
      maintenance of minimum regulatory capital (as defined in the rule) equal to
      the
      greater of $250,000 or 2% of aggregate debit items arising from customer
      transactions (as defined in the rule). NYFIX Securities’ membership in the
      Depository Trust & Clearing Corporation (the “DTCC”) requires it to maintain
      excess regulatory net capital of $10.0 million. NYFIX Millennium has elected
      to
      use the aggregate indebtedness standard method, which requires that the ratio
      of
      aggregate indebtedness to regulatory net capital (both as defined in the rule)
      shall not exceed 15 to 1. The regulatory net capital ratio for NYFIX Millennium
      at June 30, 2008 was 1.05 to 1.




*U.K.
      registered subsidiaries* - NYFIX
      International, Ltd. (“NYFIX International”) and FIXCITY are registered firms of
      the Financial Services Authority (“FSA”) in the United Kingdom. NYFIX
      International and FIXCITY are required to maintain the greater of the base
      capital resources requirement of €730,000 and € 50,000,
      respectively, or the variable capital resources requirement, which is made
      up of
      credit risk, market risk and fixed overhead (equal to three months average
      expenditures) requirements.




At
      June
      30, 2008, the aggregate regulatory net capital/resources of the Company’s
      regulated subsidiaries in the United States and United Kingdom were $34.7
      million, an excess of $22.3 million over the Company’s aggregate requirement of
      $12.4 million (including the $10 million excess required by DTCC described
      above).




Page
          13


Notes
        to
        Condensed Consolidated Financial Statements - continued
        (Unaudited)




**7.
      Restructuring Charges**




During
      October 2007, the Company entered into a strategic agreement with Citi’s Lava
      Trading (“Lava”) to offer NYFIX Fusion OMS clients a transition arrangement to
      the Lava ColorPalette® OMS in connection with the decision to discontinue the
      Fusion OMS product. As part of this discontinuation, the Company offered
      one-time termination benefits to affected employees. The Company recorded a
      restructuring charge of $0.3 million and $0.7 million during the three and
      six
      months ended June 30, 2008, respectively, which consisted of severance and
      retention costs. The Company has substantially completed the transition to
      Lava
      and does not expect to incur any additional costs.




In
      March
      2008, the Company terminated its lease and corresponding sublease of office
      space previously occupied in Stamford, CT for the payment of a $0.5 million
      lease termination fee. As a result, the Company reversed $0.5 million of
      previously recorded restructuring costs in the first quarter of 2008.




The
      liabilities related to the restructuring charges are included in the current
      portion of other long-term liabilities and other long-term liabilities. The
      following table summarizes the activity in the liabilities related to the
      restructuring charges for the six months ended June 30, 2008.




(in thousands)
            
            **Lease costs, net**
              **of sublease**
              **income**
            
            **Severance**
            
            **Total****2004 restructuring costs**Remaining
                liability at December 31, 2007
            
            $
            643
            
            $
            -
            
            $
            643Cash
                payments
            
            
            (81
            )
            
            -
            
            
            (81
            )Non-cash
                charges and other
            
            
            25
            
            
            -
            
            
            25Remaining
                liability at June 30, 2008
            
            
            587
            
            
            -
            
            
            587**2006
                restructuring costs**Remaining
                liability at December 31, 2007
            
            
            998
            
            
            -
            
            
            998Lease
                termination fee
            
            
            (514
            )
            
            -
            
            
            (514
            )Cash
                payments
            
            
            (22
            )
            
            -
            
            
            (22
            )Restructuring
                charge reversal
            
            
            (471
            )
            
            -
            
            
            (471
            )Non-cash
                charges and other
            
            
            9
            
            
            -
            
            
            9Remaining
                liability at June 30, 2008
            
            
            -
            
            
            -
            
            
            -**2007
                restructuring costs**Remaining
                liability at December 31, 2007
            
            
            -
            
            
            293
            
            
            293Restructuring
                charge
            
            
            -
            
            
            687
            
            
            687Cash
                payments
            
            
            -
            
            
            (710
            )
            
            (710
            )Remaining
                liability at June 30, 2008
            
            
            -
            
            
            270
            
            
            270Total
                restructuring liability at June 30, 2008
            
            $
            587
            
            $
            270
            
            
            857Less:
                current portion
            
            
            (619
            )Long-term
                portion
            
            $
            238




**8.
      Income Taxes**




The
      income tax provision differs from the statutory U.S. federal income tax rate
      due
      primarily to a valuation allowance provided against net deferred tax assets.
      As
      described in the Company’s 2007 Form 10-K, the Company maintains a valuation
      allowance in accordance with SFAS No. 109, *Accounting
      for Income Taxes,* on its
      net deferred tax assets. This allowance excludes the potential off-setting
      impact of the deferred tax liability for amortization of goodwill related to
      the
      acquisition of NYFIX
      Millennium and previously Renaissance
      Trading Technologies, LLC (“Renaissance”) due to the indefinite life of
      goodwill. Until the Company achieves and sustains profitability, it plans to
      maintain a valuation allowance on its net deferred tax assets.




Page
          14


Notes
        to
        Condensed Consolidated Financial Statements - continued
        (Unaudited)




**9.
      Total Comprehensive Loss**




The
      components of total comprehensive loss were as follows:




**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,**(in thousands)
            
            **2008**
            
            **2007**
            
            **2008**
            
            **2007**Net loss
            
            $
            (6,799
            )
            $
            (7,370
            )
            $
            (10,151
            )
            $
            (13,698
            )Foreign
                currency translation adjustment
            
            
            (183
            )
            
            84
            
            
            (166
            )
            
            85Total
                comprehensive loss
            
            $
            (6,982
            )
            $
            (7,286
            )
            $
            (10,317
            )
            $
            (13,613
            )




**10.
      Business Segment Information**




In
      accordance with SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information* ("SFAS
      131"), the Company is reporting certain information relating to its operating
      segments. The Company’s segments are organized into three operating divisions
      through which the Company’s chief operating decision makers manage the Company’s
      business. These divisions, as described in more detail below, are organized
      around the products and services provided to customers and represent the
      Company’s reportable segments under SFAS 131.




*FIX
      Division* .
      The FIX
      Division provides messaging channels for institutions that are members of its
      trading community for order routing and other value-added services. The FIX
      Division also provides software and consultative services to enable global
      financial institutions to utilize the industry established Financial Information
      Exchange Protocol for messaging, monitoring and processing transaction
      information. The operating results of FIXCITY have been included in the FIX
      Division since April 4, 2008, the date of acquisition.




*Transaction
      Services Division* .
      The
      Transaction Services Division is currently comprised of the two U.S. registered
      broker-dealer subsidiaries, NYFIX Millennium and NYFIX Securities, together
      with
      the execution business of NYFIX International in the U.K. NYFIX Millennium,
      an
      alternative trading system (“ATS”) registered under SEC Regulation ATS, provides
      anonymous matching and routing of U.S. equity securities. NYFIX Securities
      provides direct electronic market access and algorithmic trading products,
      operates a matched-book stock borrow/stock loan business and clears trades
      on
      behalf of itself and NYFIX Millennium. NYFIX Millennium and NYFIX Securities
      also resell certain products and services offered by the FIX Division and the
      OMS Division. In the second quarter of 2007 the Company’s Board of Directors
      approved a new initiative, Euro Millennium *TM* ,
      a
      multilateral trading facility for non-displayed liquidity in pan-European listed
      cash equities housed within NYFIX International. During the three and six months
      ended June 30, 2008, the Company incurred costs of $2.5 million and $4.7
      million, respectively, related to this initiative. The Company incurred $0.6
      million of these costs during the three and six months ended June 30, 2007.
      Euro
      Millennium was launched in March 2008 for matching U.K. listed cash equities
      and
      was expanded during August 2008 to match cash equities in other markets.
      Si gnificant
      work remains to connect new clients and to enhance the electronic trading
      capabilities of existing clients to take full advantage of this
      platform .
      As a
      result, no material revenues have been generated from this initiative and the
      Company has included these costs in Corporate & Other in the segment
      information reported below.




*Order
      Management Systems Division* .
      The OMS
      Division provides software applications for the management of New York Stock
      Exchange (“NYSE”) and Nasdaq listed trading activities. These products enable
      customers to take advantage of the broad range of products and services offered
      by other divisions. The Company does not allocate to the OMS Division any
      introductory revenue for business generated by the FIX Division and the
      Transaction Services Division from OMS Division clients. The OMS Division
      includes revenues and expenses related to the discontinued Fusion OMS product.
      The operating loss for the OMS Division during the three and six months ended
      June 30, 2008 includes severance related restructuring charges associated with
      discontinuing the Fusion OMS product of $0.4 million and $0.7 million,
      respectively as well as additional operating losses of $0.5 million and $0.8
      million during the three and six months ended June 30, 2008, respectively,
      associated with supporting the Fusion OMS product during this wind-down
      phase.




The
      Company does not currently break out total assets by reportable segment as
      there
      is a high level of shared utilization between certain reportable
      segments.




Page
          15


Notes
        to
        Condensed Consolidated Financial Statements - continued
        (Unaudited)




The
      following table presents information by reportable segment for the three and
      six
      months ended June 30, 2008 and 2007:




(in thousands)
            
            **FIX Division**
            
            **Transaction**
              **Services**
              **Division**
            
            **OMS**
              **Division**
            
            **Corporate &**
              **Other (1)**
            
            **Total****Three Months
                Ended June 30, 2008**Revenue
                - external customers
            
            $
            15,830
            
            $
            11,843
            
            $
            949
            
            $
            -
            
            $
            28,622Revenue
                (cost of revenues), net - intersegment
            
            
            805
            
            
            (1,013
            )
            
            208
            
            
            -
            
            
            -Net
                revenue
            
            
            16,635
            
            
            10,830
            
            
            1,157
            
            
            -
            
            
            28,622Operating
                income (loss) (2)
            
            
            1,339
            
            
            (1,977
            )
            
            (2,679
            )
            
            (3,430
            )
            
            (6,747
            )**Three
                Months Ended June 30, 2007**Revenue
                - external customers
            
            $
            13,656
            
            $
            14,671
            
            $
            2,431
            
            $
            -
            
            $
            30,758Revenue
                (cost of revenues), net - intersegment
            
            
            551
            
            
            (756
            )
            
            205
            
            
            -
            
            
            -Net
                revenue
            
            
            14,207
            
            
            13,915
            
            
            2,636
            
            
            -
            
            
            30,758Operating
                income (loss) (2)
            
            
            422
            
            
            1,062
            
            
            (5,545
            )
            
            (4,236
            )
            
            (8,297
            )**Six
                Months Ended June 30, 2008**Revenue
                - external customers
            
            $
            31,205
            
            $
            26,213
            
            $
            2,611
            
            $
            -
            
            $
            60,029Revenue
                (cost of revenues), net - intersegment
            
            
            1,565
            
            
            (1,990
            )
            
            425
            
            
            -
            
            
            -Net
                revenue
            
            
            32,770
            
            
            24,223
            
            
            3,036
            
            
            -
            
            
            60,029Operating
                income (loss) (2)
            
            
            3,525
            
            
            (3,048
            )
            
            (5,368
            )
            
            (5,415
            )
            
            (10,306
            )**Six
                Months Ended June 30, 2007**Revenue
                - external customers
            
            $
            26,965
            
            $
            25,685
            
            $
            5,838
            
            $
            -
            
            $
            58,488Revenue
                (cost of revenues), net - intersegment
            
            
            1,121
            
            
            (1,564
            )
            
            443
            
            
            -
            
            
            -Net
                revenue
            
            
            28,086
            
            
            24,121
            
            
            6,281
            
            
            -
            
            
            58,488Operating
                income (loss) (2)
            
            
            1,985
            
            
            1,935
            
            
            (9,773
            )
            
            (9,801
            )
            
            (15,654
            )


(1)
        Corporate & Other includes SEC investigation, restatement and related
        expenses, corporate restructuring costs/reversals, Euro Millenium costs,
        certain
        transitional costs and other corporate items which are not allocated to
        reportable segments.




(2)
      Operating income (loss) by segment reflects a significant amount of costs which
      are allocated by headcount, usage and other methods, depending on the nature
      of
      the cost. The amount of costs allocated to the Transaction Division has
      increased during the three and six months ended June 30, 2008 by $1.7 million
      and $4.4 million, respectively, primarily due to reduced allocations to the
      OMS
      Division following the decision to discontinue the Fusion OMS
      product.




**11.
      Commitments and Contingencies**




*Stock-based
      Compensation Related Matters*




*SEC
      Investigation*




On
      October 28, 2004, the Company received a request from the SEC relating to its
      historical stock option granting practices and related matters. On February
      15,
      2005, the SEC obtained a formal order of investigation, and in April 2005 issued
      a subpoena to the Company. In March and April 2005, the SEC issued subpoenas
      to
      a current director and to former officers and directors. The SEC has taken
      testimony from one current director, at least three former directors and at
      least one of the Company’s former employees, as well as from third parties,
      including the Company’s former independent registered public accounting firm.
      The SEC has also issued subpoenas to at least two current and former directors
      from whom it has not asked for testimony. The Company believes that it has
      cooperated fully with the SEC with respect to the investigation, which is still
      pending as of June 30, 2008.




*Grand
      Jury Subpoena*




In
      May
      2006, the Company received a grand jury subpoena from the U.S. Attorney for
      the
      Southern District of New York.  The subpoena sought documents relating to
      the Company’s granting of stock options.  With the agreement of the
      Assistant U.S. Attorney handling the case, the Company has responded to the
      subpoena by producing the documents it produced to the staff of the Division
      of
      Enforcement of the SEC. The U.S. Attorney has also conducted interviews with
      at
      least one current employee and two former employees (one of whom is a former
      officer) and with at least one employee of the Company’s former independent
      registered public accounting firm. This matter is still pending as of June
      30,
      2008.




Page
          16


Notes
        to
        Condensed Consolidated Financial Statements
        - continued (Unaudited)




*Shareholder
      Derivative Actions*




The
      Company is named as a nominal defendant in two shareholder derivative
      actions, one pending in Connecticut Superior Court (the "Consolidated State
      Suit") and one pending in the United States District Court for the District
      of
      Connecticut (the "Consolidated Federal Suit"). These actions also name as
      defendants a number of the Company’s former officers and directors, including
      the Company’s former Chairman and Chief Executive Officer, another former Chief
      Executive Officer and director, the Company’s former Chief Information Officer,
      two former Chief Financial Officers, the Company’s former General Counsel and
      the Company’s former Executive Vice President and President of NYFIX Millennium.
      These actions demand unspecified money damages, ask for an accounting and seek
      rescission of alleged misdated options based on, among other things, alleged
      breaches of fiduciary duty, unjust enrichment and breach of contract. Defendants
      filed motions to dismiss both of these matters.   In July 2008,
      the United States District Court for the District of Connecticut dismissed
      the
      Consolidated Federal Suit and entered judgment in favor of the Company and
      the
      individual defendants. It is unknown whether the plaintiffs will appeal
      this ruling, and the final outcome of the matter cannot be predicted at this
      time. Neither the date of the Connecticut Superior Court's ruling on the motion
      to dismiss the Consolidated State Suit nor the outcome of that suit can be
      predicted at this time.




*Tax
      Matters*




In
      2007
      and 2008, the Company has had communications with the U.K. HM Revenue &
Customs (“HMRC”) relating to historical stock option exercises. Subsequent to
      the sale of NYFIX Overseas in August 2006, G.L. forwarded correspondence from
      the HMRC relating to NYFIX Overseas’ potential liability for payroll tax
      withholdings on prior option exercises by certain former employees.




As
      of
      June 30, 2008, the Company recorded a liability of $1.9 million for potential
      amounts due in the United Kingdom related to stock option exercises under Pay
      As
      You Earn, or PAYE, and National Insurance Contribution provisions (due to the
      Company’s indemnity obligations to GL).




Based
      upon the current information available and the liabilities recognized, the
      Company believes the resolution of this tax matter will not have a material
      adverse effect on its consolidated financial condition or results of operations.
      However, the ongoing discussions with the taxing authorities could result in
      new
      information and higher than anticipated exposures. The Company is continuing
      to
      cooperate with the taxing authorities to resolve these matters.




*Other*




During
      the normal course of business, the Company becomes involved in various other
      routine legal proceedings, including issues pertaining to patent infringement,
      customer disputes and employee matters. The Company does not believe
      that the outcome of these matters will have a material adverse effect on its
      financial condition.




As
      noted
      separately in the condensed consolidated statements of operations, during the
      three and six month periods ended June 30, 2008, the Company incurred $0.1
      million and $0.3 million, respectively, relating to the stock option
      investigation and subpoenas, the grand jury subpoena, related shareholder
      derivative litigation and the pursuit of insurance recoveries. During the three
      and six months ended June 30, 2007, these costs were $1.4 million and $5.0
      million, respectively, which also included costs for related financial
      restatements and for settling expired options. These costs included outside
      counsel and auditors, contract attorneys and forensic accountants and other
      consultants. These costs do not include any portion of time that the Company’s
      employees dedicated to these matters. The Company will continue to incur
      expenses associated with these matters until such time as they are
      resolved.




During
      the six months ended June 30, 2008, the Company received an aggregate of $10
      million in advances from two of its carriers for Directors and Officers
      insurance for fees incurred in defense of the SEC investigation into the
      Company’s historical stock option activity, as well as related litigation
      expenses. This $10 million amount reflects the respective individual limits
      of
      the carriers under the Company’s policies. As these amounts can be recovered by
      the carriers in certain circumstances, the Company has deferred recognition
      of
      these proceeds in its operating results until further progress is made in
      resolving these contingencies. The Company is also pursuing reimbursement for
      additional amounts from a third carrier under a policy with a limit of $5.0
      million.




Other
      than the amount described above for employee-related taxes for stock options,
      the Company, in accordance with SFAS No. 5, *Accounting
      for Contingencies* (“SFAS
      5”), has not recorded any liability with respect to these matters as it is
      currently unable to predict the outcomes and reasonably estimate the amounts
      of
      loss, if any. With respect to the SEC investigation of stock option grants,
      the
      grand jury subpoena, the State Court Consolidated Complaint, and the Federal
      Court Consolidated Complaint associated with such matters and other related
      matters, the Company could be subject to penalties, fines or regulatory
      sanctions or claims by current and former officers, directors or employees
      for
      indemnification of costs or losses they may incur and such amounts, individually
      or collectively, could have a material impact on the Company’s financial
      condition. In addition, other actions may be brought against the Company related
      to the matters described above.




Page
          17


Notes
        to
        Condensed Consolidated Financial Statements - continued
        (Unaudited)


**12.
      Stockholders’ Equity**




*Preferred
      Stock*




The
      Company is authorized to issue 5 million shares of preferred stock. In
      connection with the private placement of convertible preferred stock discussed
      below, 1.5 million shares were designated as Series B Voting Convertible
      Preferred Stock and 0.5 million as Series C Non-Voting Convertible Preferred
      Stock.


At
      June
      30, 2008 and December 31, 2007, the Company had outstanding 1.5 million shares
      of Series B Preferred Stock. Dividends on the Series B Preferred Stock are
      payable semiannually in shares of the Company’s common stock. The number of
      shares issuable in payment of dividends is determined at an annual rate of
      7% of
      the $75 million purchase price (or $50 per share), divided by the conversion
      price then in effect (currently $5.00). Dividends on the Series B Preferred
      Stock are cumulative and all accumulated but unpaid dividends on the Series
      B
      Preferred Stock must be paid before any cash dividends may be paid to holders
      of
      common stock.




*Common
      Stock and Treasury Stock*




At
      December 31, 2007, the Company had outstanding 36,818,932 shares of common
      stock, with 906,826 held in treasury.




On
      December 11, 2007, the Board of Directors declared a dividend, payable January
      2, 2008, to holders of Series B Preferred Stock in payment of dividends
      accumulated through December 31, 2007. As a result, the Company issued 525,000
      shares of common stock, with a fair value of approximately $2,441,000 based
      on
      the market price of its common stock on the declaration date.




During
      the six months ended June 30, 2008, restricted stock units totaling 178,596
      shares vested and were settled in shares.




On
      March
      29, 2008, restrictions on 48,169 shares of common stock issued to an officer
      in
      satisfaction of his employment agreement on March 31, 2007 expired. The fair
      value of such shares has been charged to stock based compensation over the
      requisite service period. Since these shares were issued from treasury, the
      excess of the average cost of these shares over the fair value of these shares
      on the grant date was charged to retained earnings at the conclusion of the
      requisite service period. Shares totaling 16,282 were issued back to the Company
      to settle employee tax liabilities as a result of this transaction, and these
      shares were returned to treasury.




On
      June
      17, 2008, the Board of Directors declared a dividend, payable June 30, 2008,
      to
      holders of Series B Preferred Stock in payment of dividends accumulated from
      January 1, 2008 through June 30, 2008; as a result, the Company issued 525,000
      shares of common stock, with a fair value of approximately $1,969,000 based
      on
      the market price of its common stock on the declaration date. These accumulated
      dividends were reflected as a charge to loss applicable to common stockholders
      in calculating the basic and diluted loss per common share for the six months
      ended June 30, 2008.




As
      a
      result of the foregoing activity, at June 30, 2008, the Company had outstanding
      38,031,246 shares of common stock, with 923,108 held in treasury.





Page
            18





**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**




The
      following discussion should be read together with the accompanying Condensed
      Consolidated Financial Statements and notes thereto.




**Overview**




We
      are a
      pioneer in electronic trading solutions.  The NYFIX Marketplace TM is a
      global community of trading counterparties utilizing innovative services that
      optimize the business of trading, including trading workstations, middle office
      trade automation technologies and trade messaging services.  NYFIX
      Millennium provides the NYFIX Marketplace TM with
      enhanced methods of accessing liquidity.  We also provide value-added
      informational and analytic services and tools for measuring execution
      quality.  As a trusted business partner and service provider to investment
      managers, mutual fund, pension fund and hedge fund managers (the “Buy-Side”) and
      brokerage firms and banks (the “Sell-Side”), NYFIX enables low touch, low impact
      market access and transaction processing.




We
      operate businesses that design, produce and sell technology-based products
      and
      services to professional financial services organizations that are engaged
      in
      trading activities including traditional asset management (including the trading
      of those assets), proprietary trading, and/or the handling of client orders
      in
      the U.S. and international securities markets.




Many
      of
      our products and services utilize the FIX Protocol which is a messaging standard
      developed specifically for real-time electronic exchange of securities trading
      information.




We
      believe our innovative NYFIX products and services deliver value-added
      improvements in speed, quality of execution and cost efficiency by automating
      both the work flows at the user work station level and the interactive process
      of transmitting and executing orders between the Buy-Side and the Sell-Side,
      and
      through exchanges (e.g., NYSE, American Stock Exchange, Nasdaq and other
      exchanges), the OTC market, ATSs and electronic communication networks, or
      ECNs.




Sources
      of Revenue





Our
      revenues consist of subscription and maintenance fees, transaction fees, and
      product sales and services revenues. As a percentage of our total revenues
      during the six months ended June 30, 2008, subscription and maintenance revenues
      accounted for 58%, transaction revenue accounted for 40%, and product sales
      and
      services revenue accounted for 2%.




Our
      subscription and maintenance revenues principally consist of revenues from
      contracts that provide for the use of our systems and our messaging channels,
      together with managed services. Subscription and maintenance revenue rates
      are
      fixed based on a contractual period of time, typically one to three years.
      Additional services, provided under schedules, or addenda to the contracts,
      are
      either co-terminus with the original contract or have provisions similar to
      the
      original contract.  Under the terms of the subscription contracts and
      addenda, clients are typically invoiced a flat periodic charge after initial
      installation and acceptance. Subscription and maintenance also includes
      maintenance contracts for software under separate, renewable maintenance
      contracts. Software related maintenance contracts are generally for a term
      of
      one year. Revenue related to these contracts and addenda is recognized over
      the
      term of the contract, addendum, or service period, on a straight-line
      basis.  We include within our subscription and maintenance revenue amounts
      we charge for connectivity to the NYFIX trading community. These include the
      various costs of connecting clients which include telecommunications,
      installation and maintenance of routers, network management software, and staff,
      and other costs related to the management of connectivity. The connectivity
      charges are recognized as the services are provided.




Our
      subscriptions and maintenance revenues are not directly affected by trading
      volumes, however, trading volumes do affect the revenues of our clients and
      this
      could affect their future purchases of our technology and services. Pricing
      pressures due to competition, failure to sign new agreements with clients
      because of reductions in their new technology spending, and consolidation in
      the
      financial sector could affect our revenues and profitability. Our costs
      associated with supporting the subscription and maintenance agreements are
      generally fixed and thus a loss of revenue would impact
      profitability.




Transaction
      revenue primarily consists of per-share commissions charged to clients who
      send
      and receive a match and execution in our NYFIX Millennium ATS and clients to
      whom we provide execution and smart order routing technology, gateways to access
      markets and algorithmic trading ability in: (i) their own name, (ii) a third
      party name, or (iii) our name. Revenue for these services is generally invoiced
      monthly in arrears or is obtained through the clearing process within three
      days
      of the trade date, and is recognized on a trade date basis, in the period in
      which it is earned. Transaction revenue also includes the net interest spread
      on
      our matched book of securities borrowed/loaned.




Page
          19




Because
      commission revenues are earned on a per-transaction basis, such revenues
      fluctuate from period to period depending on (i) the volume of securities
      traded through our services in the U.S. and the U.K. and (ii) our
      commission rates. Commission revenues are primarily generated by orders
      delivered to us from direct computer-to-computer links driven by our clients
      routing technology, our FIXTrader order management system and other vendors’
products, as well as third party order routing networks and phone orders from
      our customers.




We
      believe that the factors that most influence our transaction volumes are the
      following:




·  macro
      trends in the global equities markets that affect overall institutional equity
      trading activity;




·  competitive
      pressure created by a proliferation of electronic execution
      competitors;




·  potential
      changes in the U.S. market structure;




·  new
      regulatory requirements or a failure to comply with existing regulatory
      requirements;




·  service
      quality and availability;




·  consolidation
      of broker-dealers or a decline in the number of hedge funds;




·  increased client demands for bandwidth and speed, requiring reinvestment in
      hardware and software; and




·  commission
      rates we charge compared to those of our competitors.




Product
      sales and services are primarily comprised of FIX software licenses and
      professional services fees. This revenue is recognized when the software is
      delivered and accepted by the client and when other contractual obligations,
      including installation, if applicable, have been satisfied and collection of
      the
      resulting receivable is reasonably assured.





Cost
      of Revenue




Cost
      of
      revenue includes the following:




·
            Data
                center operating costs, including salaries, related to equipment,
                infrastructure and software supporting operations and the NYFIX
                MarketplaceTM;


·
            Managed
                connectivity costs, including telecommunication and other costs incurred
                on behalf of clients, and costs to maintain the data centers, including
                depreciation and amortization of assets utilized by the data centers,
                which are recognized as either a cost of subscription and maintenance
                or
                cost of transaction revenue, as appropriate;


·
            Amortization
                expense of acquired intangible assets and capitalized software costs
                relating to the applicable revenue
                category;


·
            Developer
                and quality assurance personnel labor for client and product support
                of
                software products;


·
            The
                cost of leased subscription and service bureau equipment, which is
                depreciated over the estimated useful life of the equipment;
                and


·
            Execution
                and clearing costs to access various markets and exchanges and to
                process
                and settle transactions.




**Recent
      Developments**




*FIXCITY
      Acquisition* ****




On
      April
      4, 2008, we acquired 100% of the outstanding stock of FIXCITY. This
      acquisition reflects our strategy
      to aggregate liquidity for clients and to provide
      real-time information to make trading decisions. This acquisition also enhances
      our strategy of global expansion by adding significantly to our international client
      base .
      We have
      included the operating results of FIXCITY in our consolidated financial
      statements since the date of acquisition, including revenues of $0.7 million
      during the three and six months ended June 30, 2008.





Pursuant
      to the terms of the share purchase agreement, we paid £3.3 million (or
      approximately $6.6 million) in cash and also agreed to pay an additional $1.0
      million in cash contingent on the successful completion of the integration
      of
      the existing FIXCITY and NYFIX technology platforms within six months of the
      closing date. We incurred legal and consulting fees related to this acquisition
      of $0.7 million.




Page
          20




In
      addition, the share purchase agreement provides the potential for cash earn-out
      payments in years 1, 2 and 3 following the acquisition totaling up to £3.7
      million (or approx. $7.4 million) if certain revenue targets are achieved,
      with
      potential additional payments based on varying percentages of all such revenue
      if higher level target thresholds are achieved.




Through
      June 30, 2008, we have incurred integration related charges of $0.6 million,
      comprised of a $0.5 million write-off of capitalized software costs, as the
      technology acquired from FIXCITY replaced certain of our capitalized
      initiatives, as well as $0.1 million of third-party costs related to the
      integration of the technology platforms. We expect to incur $0.4 million of
      additional third-party integration costs during the remainder of 2008.




*Acquisition
      of Minority Interests*




In
      October 2007, we acquired the 20% interest in NYFIX Millennium that we did
      not
      already own.  The membership interests of the former minority members of
      NYFIX Millennium were converted into a right to receive an aggregate of $8.0
      million. As of June 30, 2008, we have paid a total of $7.8 million of the $8.0
      million. We have previously included 100% of the operating results of NYFIX
      Millennium since inception in our consolidated financial
      statements.




*Euro
      Millennium*




Since
      the
      second quarter of 2007 we have incurred costs for Euro Millennium TM ,
      a
      multilateral trading facility for non displayed liquidity in pan-European listed
      cash equities. Euro Millennium TM was
      launched in March 2008 for matching U.K. listed equities and has recently
      expanded to match listed cash equities in other European markets, including
      Belgium, France, Germany and the Netherlands. There were no meaningful revenues
      generated by Euro Millennium TM during
      the three months ended June 30 ,
      2008.
      Due to the fact that s ignificant
      work remains to connect new clients and to enhance the electronic trading
      capabilities of existing clients to take full advantage of this
      platform ,
      we
      expect losses related to Euro Millennium to continue throughout 2008 with a
      loss
      between $2.0 million and $2.5 million expected in third quarter
      2008.




*Discontinuance
      of the Fusion OMS Business*




In
      October 2007, we entered into a strategic arrangement with Lava to offer NYFIX
      Fusion OMS clients a transition arrangement to the Lava ColorPallette® OMS in
      connection with our decision to discontinue the Fusion OMS product.
      Discontinuing the Fusion OMS product will enable us to devote more time and
      resources to clients of other product offerings. In connection with
      discontinuing the Fusion OMS product, we offered one-time termination benefits
      to affected employees. We recorded a restructuring charge of $0.4 million and
      $0.7 million for the three and six months ended June 30, 2008, respectively,
      which consisted of retention and severance costs. In
      addition, we incurred a loss during the three and six months ended June 30,
      2008
      of $0.5 million and $0.8 million, respectively to support the Fusion OMS product
      during this wind-down phase. We have substantially completed the migration
      of
      clients off the Fusion OMS system and do not expect to incur any additional
      costs related to this product going forward. As compared to the three months
      ended June 30, 2007, our overall revenues from Fusion OMS clients were down
      $3.2
      million during the three months ended June 30, 2008 across all businesses.
      In
      addition to generating subscription revenue for the Fusion OMS product, these
      clients also used our transaction and FIX Marketplace services.




*SEC
      Investigation and Related Contingencies*




There
      is
      an ongoing SEC investigation of our historical stock option granting practices,
      as well as a related grand jury subpoena and related shareholder derivative
      litigations.




During
      the three and six months ended June 30, 2008, we incurred expenses of $0.1
      million and $0.3 million, respectively, relating to the stock option
      investigation and subpoenas, a grand jury subpoena, related shareholder
      derivative litigation and the pursuit of insurance recoveries. These costs
      are
      down significantly from the levels incurred in prior years.




During
      the six months ended June 30, 2008, we received an aggregate of $10 million
      in
      advances from two of our carriers for Directors and Officers insurance for
      fees
      incurred in defense of the SEC investigation into our historical stock option
      activity, as well as related litigation expenses. This $10 million amount
      reflects the respective individual limits of the carriers under our policies.
      As
      these amounts can be recovered by the carriers in certain circumstances, we
      have
      deferred recognition of these proceeds in our operating results until further
      progress is made in resolving these contingencies. We are also pursuing
      reimbursement for additional amounts from a third carrier under a policy with
      a
      limit of $5.0 million.




**Results
      of Operations for the Three and Six Month Periods Ended June 30, 2008 and 2007**




The
      following table presents our consolidated results of operations for the periods
      indicated. These consolidated results of operations are not necessarily
      indicative of the consolidated results of operations that will be achieved
      in
      any future period.




Page
          21


**Three Months Ended June 30,**
              
              
              
              **Six Months Ended June 30,**(in thousands, except percentages)
              
              **2008**
              
              **% of**
                **revenue**
              
              **2007**
              
              **% of**
                **revenue**
              
              **2008**
              
              **% of**
                **revenue**
              
              **2007**
              
              **% of**
                **revenue****Revenue:**Subscription
                  and maintenance
              
              $
              17,507
              
              
              61%
              
              $
              16,471
              
              
              54%
              
              $
              35,025
              
              
              58%
              
              $
              33,745
              
              
              58%Transaction
              
              
              10,831
              
              
              38%
              
              
              13,592
              
              
              44%
              
              
              24,099
              
              
              40%
              
              
              23,368
              
              
              40%Product
                  sales and services
              
              
              284
              
              
              1%
              
              
              695
              
              
              2%
              
              
              905
              
              
              1%
              
              
              1,375
              
              
              2%Total
                  revenue
              
              
              28,622
              
              
              100%
              
              
              30,758
              
              
              100%
              
              
              60,029
              
              
              100%
              
              
              58,488
              
              
              100%**Cost
                  of revenue:**Subscription
                  and maintenance (1)
              
              
              7,821
              
              
              27%
              
              
              8,369
              
              
              27%
              
              
              15,472
              
              
              26%
              
              
              16,915
              
              
              29%Transaction
                  (1)
              
              
              5,642
              
              
              20%
              
              
              8,359
              
              
              27%
              
              
              12,054
              
              
              20%
              
              
              13,760
              
              
              24%Product
                  sales and services (1)
              
              
              87
              
              
              0%
              
              
              206
              
              
              1%
              
              
              168
              
              
              0%
              
              
              593
              
              
              1%Total
                  cost of revenue
              
              
              13,550
              
              
              47%
              
              
              16,934
              
              
              55%
              
              
              27,694
              
              
              46%
              
              
              31,268
              
              
              53%**Gross
                  profit**
              
              
              15,072
              
              
              53%
              
              
              13,824
              
              
              45%
              
              
              32,335
              
              
              54%
              
              
              27,220
              
              
              47%**Operating
                  expense:**Selling,
                  general and administrative (1)
              
              
              20,224
              
              
              71%
              
              
              20,351
              
              
              66%
              
              
              40,620
              
              
              68%
              
              
              37,229
              
              
              64%Integration
                  charges
              
              
              596
              
              
              2%
              
              
              -
              
              
              0%
              
              
              596
              
              
              1%
              
              
              -
              
              
              0%Depreciation
                  and amortization
              
              
              494
              
              
              5%
              
              
              378
              
              
              3%
              
              
              941
              
              
              4%
              
              
              660
              
              
              3%Restructuring
                  charge
              
              
              374
              
              
              132%
              
              
              -
              
              
              0%
              
              
              216
              
              
              24%
              
              
              -
              
              
              0%SEC
                  investigation, restatement and related expenses (1)
              
              
              131
              
              
              0%
              
              
              1,392
              
              
              5%
              
              
              268
              
              
              0%
              
              
              4,985
              
              
              9%Loss
                  from operations
              
              
              (6,747
              )
              
              -24%
              
              
              (8,297
              )
              
              -27%
              
              
              (10,306
              )
              
              -17%
              
              
              (15,654
              )
              
              -27%Interest
                  expense
              
              
              (155
              )
              
              -1%
              
              
              (126
              )
              
              0%
              
              
              (366
              )
              
              -1%
              
              
              (262
              )
              
              0%Investment
                  income
              
              
              230
              
              
              1%
              
              
              1,097
              
              
              4%
              
              
              776
              
              
              1%
              
              
              2,324
              
              
              4%Other
                  income (expense), net
              
              
              -
              
              
              0%
              
              
              3
              
              
              0%
              
              
              -
              
              
              0%
              
              
              (12
              )
              
              0%Loss
                  before income tax provision
              
              
              (6,672
              )
              
              -23%
              
              
              (7,323
              )
              
              -24%
              
              
              (9,896
              )
              
              -17%
              
              
              (13,604
              )
              
              -23%Income
                  tax provision
              
              
              127
              
              
              0%
              
              
              47
              
              
              0%
              
              
              255
              
              
              0%
              
              
              94
              
              
              0%Net
                  loss
              
              
              (6,799
              )
              
              -24%
              
              
              (7,370
              )
              
              -24%
              
              
              (10,151
              )
              
              -17%
              
              
              (13,698
              )
              
              -23%Accumulated
                  preferred dividends
              
              
              (827
              )
              
              -3%
              
              
              (1,709
              )
              
              -6%
              
              
              (1,969
              )
              
              -3%
              
              
              (3,426
              )
              
              -6%Loss
                  applicable to common stockholders
              
              $
              (7,626
              )
              
              -27%
              
              $
              (9,079
              )
              
              -30%
              
              $
              (12,120
              )
              
              -20%
              
              $
              (17,124
              )
              
              -29%
 
 Percentage
                  sub-totals may not add due to rounding.(1)
                  Stock-based compensation included in the respective line items
                  above
                  follows:Cost
                  of revenue:Subscription
                  and maintenance
              
              $
              92
              
              
              
              
              $
              1
              
              
              
              
              $
              222
              
              
              
              
              $
              11Transaction
              
              
              38
              
              
              
              
              
              (1
              )
              
              
              
              
              91
              
              
              
              
              
              -Product
                  sales and services
              
              
              2
              
              
              
              
              
              1
              
              
              
              
              
              5
              
              
              
              
              
              1Selling,
                  general and administrative
              
              
              1,856
              
              
              
              
              
              125
              
              
              
              
              
              4,470
              
              
              
              
              
              223SEC
                  investigation, restatement and related expenses (a)
              
              
              -
              
              
              
              
              
              210
              
              
              
              
              
              -
              
              
              
              
              
              199$
              1,988
              
              
              
              
              $
              336
              
              
              
              
              $
              4,788
              
              
              
              
              $
              434




(a)
      Relates to expiring options to be cash settled and extending the normal 90
      day
      post-termination exercise period.





Page
            22




**Revenue**




The
      following table presents our components of revenue:




**Three Months Ended**
              **June 30,**
            
            **Increase**
              **(Decrease)**
            
            **Six Months Ended**
              **June 30,**
            
            **Increase**
              **(Decrease)**(in thousands, except percentages)
            
            **2008**
            ****
            **2007**
            ****
            **$**
            ****
            **%**
            ****
            **2008**
            ****
            **2007**
            ****
            **$**
            ****
            **%**Subscription
                and maintenance
            
            $
            17,507
            
            $
            16,471
            
            $
            1,036
            
            
            6%
            
            $
            35,025
            
            $
            33,745
            
            $
            1,280
            
            
            4%Transaction
            
            
            10,831
            
            
            13,592
            
            
            (2,761
            )
            
            -20%
            
            
            24,099
            
            
            23,368
            
            
            731
            
            
            3%Product
                sales and services
            
            
            284
            
            
            695
            
            
            (411
            )
            
            -59%
            
            
            905
            
            
            1,375
            
            
            (470
            )
            
            -34%Total
                revenue
            
            $
            28,622
            
            $
            30,758
            
            $
            (2,136
            )
            
            -7%
            
            $
            60,029
            
            $
            58,488
            
            $
            1,541
            
            
            3%




*Subscription
      and Maintenance*




Subscription
      and maintenance revenue increased during the three months ended June 30, 2008,
      as compared to the three months ended June 30, 2007, primarily due to an
      increase in subscriptions (and related managed services) of order routing
      messaging channels offered by our FIX Division and the impact of the FIXCITY
      acquisition, offset in part by a decrease in subscriptions (and related managed
      services) for our OMS Division products. As of June 30, 2008, we had 8,960
      billable direct order routing messaging channels in service, an increase of
      20%
      over the 7,484 messaging channels in service at June 30, 2007, and an increase
      of 3% over the 8,666 messaging channels in service at March 31, 2008. The growth
      in our messaging channel subscription revenue during the three months ended
      June
      30, 2008 was slowed by a decrease in revenues of $0.4 million attributable
      to
      former Fusion OMS clients, as compared to the three months ended June 30, 2007.
      FIXCITY, which was acquired in April 2008, contributed $0.7 million in
      subscription revenues during the three months ended June 30, 2008. The decline
      in subscriptions (and related managed services) of our OMS Division products
      of
      $1.4 million, to $1.2 million for the three months ended June 30, 2008 from
      $2.6
      million during the three months ended June 30, 2007, was due primarily to the
      discontinuation of our Fusion OMS product as well as cancellations from other
      desktop clients. OMS
      subscription revenue from former Fusion OMS clients decreased by $0.7 million
      during the three months ended June 30, 2008 as compared to the three months
      ended June 30, 2007. Revenue from r ecurring
      maintenance on licensed software was $1.0 million for both the three months
      ended June 30, 2008 and the three months ended June 30, 2007.




Subscription
      and maintenance revenue increased during the six months ended June 30, 2008,
      as
      compared to the six months ended June 30, 2007, primarily due to an increase
      in
      subscriptions (and related managed services) of order routing messaging channels
      offered by our FIX Division and the impact of the FIXCITY acquisition, offset
      in
      part by a decrease in subscriptions (and related managed services) of our OMS
      Division products. FIXCITY, which was acquired in April 2008, contributed $0.7
      million in subscription revenues during the six months ended June 30, 2008.
      The
      growth in our messaging channel subscription and maintenance revenue during
      the
      six months ended June 30, 2008 was slowed by a decrease in revenues of $0.7
      million attributable to former Fusion OMS clients, as compared to the six months
      ended June 30, 2007. The decline in subscriptions (and related managed services)
      of our OMS Division products of $3.3 million, to $3.0 million for the six months
      ended June 30, 2008 from $6.3 million during the six months ended June 30,
      2007,
      was due primarily to the discontinuation (during the second quarter of 2007)
      of
      certain floor application products, the discontinuation of our Fusion OMS
      product as well as cancellations from other desktop clients. OMS
      subscription revenue from former Fusion OMS clients decreased by $1.1 million
      during the six months ended June 30, 2008 as compared to the six months ended
      June 30, 2007. Revenue from r ecurring
      maintenance on licensed software was $1.9 million for both the six months ended
      June 30, 2008 and the six months ended June 30, 2007.




*Transaction*




Transaction
      revenue decreased during the three months ended June 30, 2008 primarily due
      to a
      decrease in commissions on trade executions. Commissions decreased $2.6 million
      to $10.6 million during the three months ended June 30, 2008 from $13.2 million
      during three months ended June 30, 2007, due primarily to a decrease in
      commissions from Sell-Side clients. The decrease from Sell-Side clients was
      primarily due to a decrease in the use of the NYFIX NEXAS TM algorithmic
      trading products and a decrease in commissions from direct market access
      services, offset in part by an increase in commissions from NYFIX Millennium.
      The decline in revenue from NYFIX NEXAS TM and from
      OTC direct market access was primarily attributable to lower trading volumes
      from former Fusion OMS clients. Transaction revenue from former Fusion OMS
      clients decreased $2.1 million during the three months ended June 30, 2008
      as
      compared to the three months ended June 30, 2007. The additional decline in
      revenue for DOT direct market access services (including associated pass-through
      charges) of $1.8 million was primarily attributable to our decision to improve
      our margins by eliminating discounts for these services below cost for clients
      who do not generate valuable pass-through matches in NYFIX Millennium. The
      average daily matched volume in NYFIX Millennium declined 11.5% to 48.1 million
      shares during the three months ended June 30, 2008 from 54.4 million shares
      during the three months ended June 30, 2007. Our securities lending business
      generated net interest spread on its matched book stock borrow/stock loan
      portfolio of $0.2 million during the three months ended June 30, 2008, compared
      to $0.4 million during the three months ended June 30, 2007. The decrease in
      net
      interest was principally due to compressed interest rate spreads.




Page
          23


Transaction
      revenue increased during the six months ended June 30, 2008 primarily due to
      an
      increase in commissions on trade executions. Commissions increased $0.9 million
      to $23.6 million during the six months ended June 30, 2008 from $22.7 million
      during six months ended June 30, 2007, primarily due to a $1.7 million increase
      in commissions from Buy-Side clients offset by a $0.9 million decrease in
      commissions from Sell-Side clients. The increase from Buy-Side clients reflected
      the increased focus on these clients by our expanded sales force, including
      in
      the United Kingdom. The decrease from Sell-Side clients was primarily due to
      a
      decrease in the use of the NYFIX NEXAS TM algorithmic
      trading products and a decrease in commission from direct market access
      services, offset in part by an increase in commissions from NYFIX Millennium.
      The decline in revenue from NYFIX NEXAS TM and from
      OTC direct market access was primarily attributable to lower volumes from former
      Fusion OMS clients. Transaction revenue from former Fusion OMS clients decreased
      by $1.2 million during the six months ended June 30, 2008 as compared to the
      six
      months ended June 30, 2007. The additional decline in revenue for DOT direct
      market access services (including associated pass-through charges) of $2.2
      million was primarily attributable to our decision to improve our margins by
      eliminating discounts for these services below cost for clients who do not
      generate valuable pass-through matches in NYFIX Millennium. The average daily
      matched volume in NYFIX Millennium during the six months ended June 30, 2008
      was
      48.8 million shares, a 2% increase over the average of 47.9 million shares
      during the six months ended June 30, 2007. Our securities lending business
      generated net interest spread on its matched book stock borrow/stock loan
      portfolio of $0.5 million during the six months ended June 30, 2008, compared
      to
      $0.7 million during the six months ended June 30, 2007. The decrease in net
      interest was principally due to tighter interest rate spreads.




Included
      in the NYFIX Millennium volume figures reported above are conditional orders
      executed against pass-through orders and other conditional orders, and third
      market trades crossed by clients and reported by NYFIX Millennium to
      Nasdaq.




*Product
      Sales and Services*




Product
      sales and services revenues decreased during the three months ended June 30,
      2008 primarily due to a decrease in sales of software licenses by our FIX
      Division. License fees for our FIX software products decreased $0.3 million
      to
      $0.1 million during the three months ended June 30, 2008 as compared to $0.4
      million for the same period in 2007, due in part to customers subscribing to
      our
      FIX software products on a monthly basis instead of purchasing the licenses
      as a
      one-time upfront fee. Professional services revenue, which includes FIX
      training, decreased $0.1 million to $0.2 million during the three months ended
      June 30, 2008 as compared to $0.3 million for the same period in
      2007.




Product
      sales and services revenues decreased during the six months ended June 30,
      2008
      primarily as a result of a decrease in sales of software licenses by our FIX
      Division. License fees for our FIX software products decreased $0.3 million
      to
      $0.5 million during the six months ended June 30, 2008 from $0.8 million for
      the
      same period in 2007, due primarily to customers subscribing to our FIX software
      products on a monthly basis instead of purchasing the licenses as a one-time
      upfront fee. Professional services revenue, including training, decreased by
      $0.2 million to $0.4 million during the six months ended June 30, 2008 from
      $0.6
      million for the same period in 2007.




Page
          24




**Costs
      and Expenses**




*Cost
      of Revenue*




The
      following table presents our cost of revenue:




**Three Months Ended**
              **June 30,**
            
            **Decrease**
            
            **Six Months Ended**
              **June 30,**
            
            **Decrease**(in thousands, except percentages)
            
            **2008**
            
            **2007**
            
            **$**
            ****
            **%**
            ****
            **2008**
            ****
            **2007**
            ****
            **$**
            ****
            **%**Subscription and
                maintenance
            
            $
            7,821
            
            $
            8,369
            
            $
            (548
            )
            
            -7%
            
            $
            15,472
            
            $
            16,915
            
            $
            (1,443
            )
            
            -9%Transaction
            
            
            5,642
            
            
            8,359
            
            
            (2,717
            )
            
            -33%
            
            
            12,054
            
            
            13,760
            
            
            (1,706
            )
            
            -12%Product
                sales and services
            
            
            87
            
            
            206
            
            
            (119
            )
            
            -58%
            
            
            168
            
            
            593
            
            
            (425
            )
            
            -72%Total
                cost of revenue
            
            $
            13,550
            
            $
            16,934
            
            $
            (3,384
            )
            
            -20%
            
            $
            27,694
            
            $
            31,268
            
            $
            (3,574
            )
            
            -11%





*Subscription
      and Maintenance*




Subscription
      and maintenance cost of revenue decreased during the three months ended June
      30,
      2008 primarily due to lower amortization of capitalized software costs and
      other
      intangible assets of $0.4 million, lower allocated labor costs of $0.3 million,
      a decrease in telecommunication costs of $0.1 million and decreases in various
      other expenses. These decreases were partially offset by an increase of $0.4
      million in recurring fees paid to third-party order management system providers
      for messaging channels with their clients. As a percentage of related revenue,
      these costs decreased to 45% for the three months ended June 30, 2008 as
      compared to 51% for the three months ended June 30, 2007.




Subscription
      and maintenance cost of revenue decreased during the six months ended June
      30,
      2008 primarily due to lower amortization of capitalized software costs and
      intangible assets of $0.9 million, lower allocated labor costs of $0.6 million
      and a decrease in telecommunication costs of $0.4 million. These decreases
      were
      offset in part by an increase of $0.5 million in recurring fees paid to
      third-party order management system providers for messaging channels with their
      clients. As a percentage of related revenue, these costs decreased to 44% for
      the six months ended June 30, 2008 as compared to 50% for the six months ended
      June 30, 2007.




*Transaction*




Transaction
      cost of revenue decreased during the three months ended June 30, 2008 primarily
      due to lower execution and clearing fees of $3.7 million, offset in part by
      increases in the following expenses: allocated data center costs of $0.3
      million, allocated labor costs of $0.3 million, depreciation costs of $0.3
      million, and market data fees of $0.1 million. The decrease in execution and
      clearing fees was primarily attributable to the reduced transaction revenue
      described above and a change in the revenue mix to higher margin services.
      Execution fees during the three months ended June 30, 2007 also included linkage
      fees from the NYSE to route orders to other market centers of $2.3 million,
      $1.6
      million of which we were not able to pass through to our DOT direct market
      access clients due to difficulties in capturing trade information. As
      a
      percentage of related revenue, these costs decreased to 52% for the three months
      ended June 30, 2008, as compared to 61% for the three months ended June 30,
      2007 **.**




Transaction
      cost of revenue decreased during the six months ended June 30, 2008 primarily
      due to lower execution and clearing fees of $3.7 million, offset in part by
      increases in the following expenses: allocated data center costs of $0.6
      million, depreciation costs of $0.5 million, allocated labor costs of $0.4
      million, market data fees of $0.3 million, communication costs of $0.1 million
      and software maintenance of $0.1 million. The decrease in execution and clearing
      fees was primarily due to a change in the revenue mix to higher margin services
      and a rebate received during the first quarter of $0.5 million on clearing
      services used. Execution fees during the three months ended June 30, 2007 also
      included linkage
      fees from the NYSE to route orders to other market centers of $3.2 million,
      $1.9
      million of which we were not able to pass through to our DOT direct market
      access clients due to difficulties in capturing trade information. As
      a
      percentage of related revenue, these costs decreased to 50% for the six months
      ended June 30, 2008, as compared to 59% for the six months ended June 30,
      2007.




*Product
      Sales and Services*




Product
      sales and services cost of revenues decreased during the three months ended
      June
      30, 2008 due to lower intangible asset amortization of $0.1 million as a result
      of certain intangible assets becoming fully amortized in the second quarter
      of
      2007. As a percentage of related revenue these costs were comparable at 31%
      and
      30% for the three months ended June 30, 2008 and 2007,
      respectively.




Page
          25


Product
      sales and services cost of revenue decreased during the six months ended June
      30, 2008 due to lower intangible asset amortization of $0.4 million as a result
      of certain intangible assets becoming fully amortized in the second quarter
      of
      2007. As a percentage of related revenue these costs decreased to 19% for the
      six months ended June 30, 2008 as compared to 43% for the same period of
      2007.




*Selling,
      General and Administrative Expenses (SG&A)*




The following table presents the components of our selling, general and
      administrative expense :




**Three Months Ended**
              **June 30,**
            
            
            **Increase (Decrease)**
            
            
            **Six Months Ended**
              **June 30,**
            
            
            **Increase (Decrease)**(in thousands, except percentages)
            
            **2008**
            
            
            **2007**
            
            
            **$**
            
            **%**
            ****
            
            **2008**
            
            
            **2007**
            
            
            **$**
            
            **%**Compensation and related
            
            $
            10,313
            
            
            $
            8,663
            
            
            $
            1,650
            
            
            19%
            
            
            $
            19,245
            
            
            $
            16,501
            
            
            $
            2,744
            
            
            17%Occupancy
                and related
            
            
            1,161
            
            
            
            1,096
            
            
            
            65
            
            
            6%
            
            
            
            2,332
            
            
            
            1,906
            
            
            
            426
            
            
            22%Marketing,
                travel and entertainment
            
            
            1,236
            
            
            
            1,366
            
            
            
            (130
            )
            
            -10%
            
            
            
            2,451
            
            
            
            2,157
            
            
            
            294
            
            
            14%Professional
                fees (including consulting)
            
            
            1,692
            
            
            
            3,923
            
            
            
            (2,231
            )
            
            -57%
            
            
            
            4,082
            
            
            
            6,844
            
            
            
            (2,762
            )
            
            -40%General
                and other
            
            
            1,269
            
            
            
            1,963
            
            
            
            (694
            )
            
            -35%
            
            
            
            2,865
            
            
            
            3,605
            
            
            
            (740
            )
            
            -21%Stock-based
                compensation
            
            
            1,856
            
            
            
            125
            
            
            
            1,731
            
            
            1385%
            
            
            
            4,470
            
            
            
            223
            
            
            
            4,247
            
            
            1904%Transitional
                rebuilding and remediation
            
            
            64
            
            
            
            1,719
            
            
            
            (1,655
            )
            
            -96%
            
            
            
            212
            
            
            
            3,461
            
            
            
            (3,249
            )
            
            -94%Transitional
                employment costs
            
            
            133
            
            
            
            852
            
            
            
            (719
            )
            
            -84%
            
            
            
            243
            
            
            
            1,888
            
            
            
            (1,645
            )
            
            -87%Euro
                Millennium costs
            
            
            2,500
            
            
            
            644
            
            
            
            1,856
            
            
            288%
            
            
            
            4,720
            
            
            
            644
            
            
            
            4,076
            
            
            633%Total
                SG&A
            
            $
            20,224
            
            
            $
            20,351
            
            
            $
            (127
            )
            
            -1%
            
            
            $
            40,620
            
            
            $
            37,229
            
            
            $
            3,391
            
            
            9%Percent
                of total revenue
            
            
            71
            %
            
            
            66
            %
            
            
            
            
            
            
            
            
            
            68
            %
            
            
            64
            %





Due
      to
      the fact that we have completed our restatement and relisting initiatives,
      as
      well as our transitional programs, we have increased our focus on improving
      our
      margins and are more actively managing our cost structure. We realized
      significant achievements in these efforts during the first six months of 2008.
      Excluding stock-based compensation, Euro Millennium and transitional costs,
      SG&A for the first half of 2008 decreased by 14% over the second half of
      2007 due primarily to reduced costs for outside professionals (e.g. legal and
      accounting), consultants and various other expenses, offset in part by
      termination costs incurred in June 2008 associated with our reduction in
      headcount.




*Compensation
      and Related*




The
      increase in the portion of recurring compensation and related costs included
      in
      SG&A for the three and six months ended June 30, 2008 was primarily due to
      $0.9 million of termination costs associated with the approximate 10% reduction
      of our staff of employees and consultants in June 2008, as well as increases
      in
      other employment costs. We expect our headcount reduction initiative to reduce
      expenses by more than $5 million on an annualized basis.




*Occupancy
      and Related*




The
      increase in occupancy and related costs for the three and six months ended
      June
      30, 2008 was primarily due to additional rent expense associated with expanding
      our office space in both our New York and London locations.




*Marketing,
      Travel and Entertainment*




The
      decrease in marketing, travel and entertainment expenses for the three months
      ended June 30, 2008 primarily reflects a decrease in travel and entertainment
      costs as a result of the timing of sponsored events and a reduction in general
      corporate travel.




The
      increase in marketing, travel and entertainment expenses for the six months
      ended June 30, 2008 primarily reflected increased employee travel related costs
      incurred in the first quarter to support our European expansion efforts.




Marketing
      expenses for the three and six months ended June 30, 2008 were comparable to
      the
      same periods in 2007.




*Professional
      Fees (including consulting)*




The
      decrease in professional fees incurred for the three and six months ended June
      30, 2008, was primarily due to decreases in legal and accounting fees and
      consulting fees. Consulting fees decreased $1.2 million and $1.1 million for
      the
      three and six months ended June 30, 2008, respectively. Legal and accounting
      fees decreased $1.0 million and $1.7 million for the three and six months ended
      June 30, 2008, respectively. Consulting fees included in this category do not
      include the time spent by outside consultants and advisors on the SEC
      investigation, restatements and related issues as such costs have been
      separately categorized below.




Page
          26




*General
      and Other*




The
      decrease in general and other expenses for the three and six months ended June
      30, 2008 as compared to the same period of 2007, was primarily due to decreases
      in recruiting and temporary administrative help, partially offset by higher
      software maintenance for our internal systems.




*Stock-based
      Compensation*




The
      increase in stock-based compensation included in SG&A for the three and six
      months ended June 30, 2008 was primarily due to significant grants of stock
      options and restricted stock units during the fourth quarter of 2007 and first
      half of 2008, following the adoption of the 2007 Omnibus Equity Compensation
      Plan. These grants were intended to be an up-front, multi-year program to assist
      in retention and to further promote alignment of the interests of our employees
      with those of our stockholders. Stock-compensation expense (including the amount
      recorded in cost of revenue) is expected to be approximately $2.0 million per
      quarter for the remainder of 2008. This amount may vary, however, depending
      on
      additional grants or cancellations and whether performance awards actually
      vest.




*Transitional
      Rebuilding and Remediation Costs*




Transitional
      rebuilding and remediation costs reflect the impact of a company-wide,
      Board-approved effort in 2007, following the $75 million preferred stock
      investment by Warburg Pincus, to remediate deficiencies involving critical
      operational systems and processes, including technology infrastructure and
      management information systems. As a result of this effort, during 2007, we
      remediated our lab environment, data replication and back-up, network
      monitoring, application security and we enabled more timely and detailed
      internal and external financial reporting. These efforts also addressed certain
      historical administrative issues such as reorganizing certain subsidiaries
      and
      initiating new compensation programs which were rolled out in October 2007.
      During the three and six months ended June 30, 2008, we incurred $0.1 million
      and $0.2 million of such costs, respectively. We do not expect to incur any
      additional costs due to the fact that we have completed our last project under
      this program.




*Transitional
      Employment Costs*




Transitional
      employment costs reflect our efforts to build
      critical teams, retain key employees, and remediate certain skill gaps. These
      transitional costs, primarily consisting of sign-on bonuses, retention bonuses
      and severance and other termination benefits were expensed over the required
      service period. During
      the three and six months ended June 30, 2008, we incurred $0.1 million and
      $0.2
      million of such costs, respectively. We do
      not expect to incur any additional costs due to the fact that the program
      expired at the end of the second quarter of 2008.




*Euro
      Millennium Costs*




Since
      second quarter 2007, we have incurred costs for Euro Millennium, a neutral
      dark
      pool of liquidity for pan-European listed cash equities. These costs include
      compensation and related costs, consulting, marketing and travel related costs. There
      were no meaningful revenues generated by Euro Millennium TM during
      the three months ended June 30 ,
      2008.
      Due to the fact that s ignificant
      work remains to connect new clients and to enhance the electronic trading
      capabilities of existing clients to take full advantage of this
      platform ,
      we
      expect losses related to Euro Millennium to continue throughout 2008 with a
      loss
      between $2.0 million and $2.5 million expected in third quarter 2008. Once
      this
      initiative exits its initial phase and to the extent that Euro Millennium
      generates consistent revenues, we will include the specific costs associated
      with Euro Millennium in transaction cost of revenue and the various SG&A
      categories detailed above.




*Other
      Operating Expenses*




Other
      operating expenses consist of the following:


**Three Months Ended**
                **June 30,**
              
              **Increase**
                **(Decrease)**
              
              **Six Months Ended**
                **June 30,**
              
              **Increase**
                **(Decrease)**(in thousands)
              
              **2008**
              
              **2007**
              
              **$**
              
              **2008**
              
              **2007**
              
              **$**Integration charges
              
              $
              596
              
              $
              -
              
              $
              596
              
              $
              596
              
              $
              -
              
              $
              596Depreciation
                  and amortization
              
              
              494
              
              
              378
              
              
              116
              
              
              941
              
              
              660
              
              
              281Restructuring
                  charge
              
              
              374
              
              
              -
              
              
              374
              
              
              216
              
              
              -
              
              
              216SEC
                  investigation, restatement and related expenses
              
              
              131
              
              
              1,392
              
              
              (1,261
              )
              
              268
              
              
              4,985
              
              
              (4,717
              )




Page
          27


*Integration
      Charges*




During
      the three and six months ended June 30, 2008, we incurred integration charges
      related to the acquisition of FIXCITY in April 2008. These costs included $0.5
      million of non-cash valuation adjustments to capitalized software replaced
      by
      acquired technology and $0.1 million of third party consulting costs to
      integrate the acquired technology platform. We expect to incur $0.4 million
      of
      additional third-party integration costs during the remainder of 2008.




*Depreciation
      and Amortization*




The
      increase in the portion of depreciation and amortization included in SG&A
      for the three and
      six months
      ended June 30, 2008 was due to increased general overhead capital expenditures
      during 2007.




*Restructuring
      Charge*




The
      restructuring charge for the three  months
      ended June 30, 2008 reflects employment costs of $0.4 million related to the
      discontinuance of our Fusion OMS product and the continuing transition of our
      clients to other platforms.




The
      restructuring charge for the six months ended June 30, 2008 reflects employment
      costs of $0.7 million related to the discontinuance of our Fusion OMS product,
      offset by a $0.5 million reversal of amounts previously recorded as
      restructuring costs as a result of the termination
      of our lease and corresponding sublease of office space previously occupied
      in
      Stamford.




We
      have
      substantially completed the migration of clients off of the Fusion OMS system
      and do not expect to incur any additional restructuring charge related to this
      product going forward.




*SEC
      Investigation, Restatement and Related Expenses*




During
      the three and six months ended June 30, 2008, we incurred costs relating to
      the
      stock option investigation and subpoenas, a grand jury subpoena related to
      our
      stock option grants, related shareholder derivative litigation and the pursuit
      of insurance recoveries. The costs incurred during the three and six months
      ended June 30, 2007 also included costs for related financial restatements
      and
      for settling expired options. These costs include outside counsels and auditors,
      contract attorneys, forensic accountants and other consultants. These costs
      do
      not include any portion of time that our employees have dedicated to these
      matters. We will continue to incur expenses associated with these matters until
      they are resolved. The amount of such expenses will likely vary and may be
      material.




The
      decrease in these costs during the three and six months ended June 30,
      2008 reflects
      the filing of our Annual Report on Form 10-K for the fiscal year ended December
      31, 2005 in March of 2007 following the restatement of our consolidated
      financial statements as a result of the SEC investigation into prior stock
      option grants and related restatements.




During
      the six month period ended June 30, 2008, we received an aggregate of $10
      million in advances from two of our carriers for Directors and Officers
      insurance for fees incurred in defense of the SEC investigation into our
      historical stock option activity, as well as related litigation expenses. This
      $10 million amount reflects the respective individual limits of the carriers
      under our policies. As these amounts can be recovered by the carriers in certain
      circumstances, we have deferred recognition of these proceeds in our operating
      results until further progress is made in resolving these contingencies. We
      are
      also pursuing reimbursement for additional amounts from a third carrier under
      a
      policy with a limit of $5.0 million.




**Other
      Income (Expense)**




Other
      income (expense) items are as follows:




**Three Months Ended**
              **June 30,**
            
            **Increase**
              **(Decrease)**
            
            **Six Months Ended**
              **June 30,**
            
            **Increase**
              **(Decrease)**(in thousands)
            
            **2008**
            
            **2007**
            
            **$**
            
            **2008**
            
            **2007**
            
            **$**Interest
                expense
            
            $
            (155
            )
            $
            (126
            )
            $
            29
            
            $
            (366
            )
            $
            (262
            )
            $
            104Investment
                income
            
            
            230
            
            
            1,097
            
            
            (867
            )
            
            776
            
            
            2,324
            
            
            (1,548
            )Other
                income (expense), net
            
            
            -
            
            
            3
            
            
            (3
            )
            
            -
            
            
            (12
            )
            
            12




*Interest* *Expense* **




The
      increase in interest expense for the three and six months ended June 30, 2008
      was primarily attributable to additional interest incurred on the additional
      $2.5 million convertible note issued in October 2007.




Page
          28




*Investment* *Income*




The
      decrease in investment income for the three and six months ended June 30, 2008
      reflected lower average cash balances invested and lower interest rates during
      the period.




**Income
      Tax Provisi** **on**




The
      income tax provisions for the three and six months ended June 30, 2008 were
      solely attributable to the impact of deducting goodwill related to the NYFIX
      Millennium acquisition in our tax filings. The income tax provisions for the
      three and six months ended June 30, 2007 were solely attributable to the impact
      of deducting goodwill related to the Renaissance acquisition in our tax filings.
      All other tax effects during the three and six months ended June 30, 2008 and
      2007 have been netted out in our deferred tax asset valuation reflecting our
      view that historical pre-tax book income and historical income for tax purposes
      are not sufficient to support a conclusion that the value of our net deferred
      tax assets are more likely than not to be realized. Until we achieve and sustain
      profitability, we plan to maintain a valuation allowance on our net deferred
      tax
      assets.




**Liquidity
      and Capital Resources**




We
      derive
      our liquidity and capital resources primarily from issuances of stock and from
      long-term borrowings. At June 30, 2008, we had cash and cash equivalents of
      $52.2 million, a reduction from our balance at December 31, 2007, principally
      due to the timing of accrued employee compensation payments for 2007, including
      annual incentive and retention related bonuses, commissions, severance and
      employee benefit obligations, payments to the former minority owners of NYFIX
      Millennium to acquire their interests, as well as payment for the acquisition
      of
      FIXCITY. We believe resources available at June 30, 2008 will be sufficient
      to
      finance our current investing and operating needs as well as the net capital
      requirements of our broker-dealer subsidiaries for at least the next twelve
      months. To the extent that we choose to pursue a strategic acquisition, we
      may
      need to raise additional outside funding, including through issuing additional
      equity which could dilute existing stockholders. At June 30, 2008, $39.4 million
      of our total cash and cash equivalents were held in our broker-dealer
      subsidiaries, which resulted in our excess regulatory capital, as detailed
      below.




**As of****June 30,**
            
            **December 31,**(in thousands)
            
            **2008**
            
            **2007**Cash
                and cash equivalents
            
            $
            52,178
            
            $
            75,657




**Six Months Ended June 30,**(in thousands)
            
            **2008**
            
            **2007**Net cash used in
                operating activities
            
            $
            (4,072
            )
            $
            (13,200
            )Net
                cash used in investing activities
            
            
            (18,547
            )
            
            (6,832
            )Net
                cash used in financing activities
            
            
            (827
            )
            
            (725
            )Effect
                of exchange rate changes on cash
            
            
            (33
            )
            
            79Net
                decrease in cash and cash equivalents
            
            $
            (23,479
            )
            $
            (20,678
            )




*Operating
      Activities*




The
      following table sets forth our net loss adjusted for non-cash items, such as
      depreciation, amortization, deferred taxes, and stock-based compensation, and
      the effect on cash used in operating activities of changes in working capital
      and other operating accounts between periods.




**Six Months Ended June 30,**(in thousands)
            
            **2008**
            
            **2007**Net loss
                adjusted for non-cash items
            
            $
            354
            
            $
            (7,986
            )Effect
                of changes in working capital and other operating accounts
            
            
            (4,426
            )
            
            (5,214
            )Net
                cash used in operating activities
            
            $
            (4,072
            )
            $
            (13,200
            )




Changes
      in working capital and other operating accounts affected cash flows during
      the
      six months ended June 30, 2008 primarily as a result of a decrease in the level
      of accounts payable and accrued expenses between periods, primarily from the
      net
      effect of the timing of accrued employee compensation payments for 2007
      including annual incentive and retention related bonuses, commissions, severance
      and employee benefit obligations, and the receipt of deferred insurance
      proceeds, as well as increases in net clearing assets due the growth of our
      business and the timing of settlement obligations.




Page
          29




*Broker-Dealer
      Operations*




Clearing
      assets reflect amounts on hand to support our ability to settle the transactions
      of NYFIX Millennium, NYFIX Securities and NYFIX International, such as
      receivables from clearing organizations and firms and deposits with clearing
      organizations and firms, as well as balances to support our matched-book stock
      borrow/stock loan business. Our matched-book balances include offsetting stock
      borrowed and stock loaned and securities failed-to-deliver and securities
      failed-to-receive. At June 30, 2008, the net balance for clearing assets and
      clearing liabilities was a net receivable of $5.4 million.




Securities
      borrowed and securities loaned are recorded at the amount of cash collateral
      provided for securities borrowed transactions and received for securities loaned
      transactions, plus accrued interest. We monitor the market value of securities
      borrowed and loaned on a daily basis with additional collateral obtained or
      refunded as necessary. At June 30, 2008, clearing assets include stock borrows
      of $530.2 million and clearing liabilities include stock loans of $529.8
      million.




NYFIX
      Millennium and NYFIX Securities are U.S. registered broker-dealers required
      to
      maintain levels of regulatory net capital under Rule 15c3-1 of the Exchange
      Act.
      NYFIX Securities’ DTCC membership, used to self-clear securities transactions,
      requires it to maintain $10 million in excess of its required net capital.
      NYFIX
      International and FIXCITY are registered firms with the FSA, required to
      maintain the greater of the base capital resources requirement of €730,000 and € 50,000,
      respectively, or the variable capital resources requirement, which is made
      up of
      credit risk, market risk and fixed overhead (equal to six months average
      expenditures) requirements. At June 30, 2008, the aggregate regulatory net
      capital/resources of our regulated subsidiaries in the United States and the
      United Kingdom were $34.7 million, an excess of $22.3 million over our aggregate
      requirement of $12.4 million (including the $10 million excess required by
      DTCC
      described above).




On
      June
      3, 2008, FIXCITY became a registered firm of the FSA. To satisfy the financial
      resources requirement, $1.0 million of equity capital was injected into FIXCITY
      in May 2008.




*Investing
      Activities*




Investments
      in current technology to maintain our infrastructure and to enhance our products
      remain an important requirement for our available cash resources.




Net
      cash
      used in investing activities for the six months ended June 30, 2008 was $18.5
      million. This consisted of capital expenditures for property and equipment,
      principally for data center equipment and software, of $4.0 million, capitalized
      software development costs of $2.8 million, $7.0 million in payments
      to the former minority owners of NYFIX Millennium to acquire their interests
      and
      $6.9 million for the acquisition of FIXCITY, net of cash acquired. These
      payments were partially offset by $2.1 million received from GL in payment
      of an
      earn out related to the sale of NYFIX Overseas in August 2006 net of
      amounts paid to the NYFIX Overseas management team .




Net
      cash
      used in investing activities for the six months ended June 30, 2007 was $6.8
      million. This consisted of capital expenditures for property and equipment,
      principally for data center equipment and software, of $5.1 million and
      capitalized software development costs of $1.8 million.




*Financing
      Activities*




Our
      financing activities primarily consist of long-term debt issued for working
      capital purposes, capital lease obligations used for equipment purchases, and
      issuances of capital stock for general corporate purposes and business
      development activities. At
      June
      30, 2008, we had long-term debt and capital lease obligations outstanding
      aggregating $10.8 million (including current portions).




At
      June
      30, 2008, we had outstanding two convertible notes aggregating $10.0 million
      with substantially similar terms to the same lender. The convertible notes
      incur
      interest at a rate of 5% and are due in December 2009. At June 30, 2008, the
      price at which the lender could convert the convertible notes into shares of
      our
      common stock was $5.63 per share. The conversion price may be reduced if we
      issue shares of common stock at a price below the conversion price in effect,
      excluding stock option exercises, the settlement of obligations outstanding
      as
      of the date of the convertible note and other transactions previously approved
      by our Board of Directors.




Net
      cash
      used in financing activities for the six months ended June 30, 2008 and 2007
      was
      $0.8 million and $0.7 million, respectively, consisting primarily of principal
      payments under capital lease obligations.




**Commitments
      and Contingencies**




There
      are
      various lawsuits and claims pending against us as well as ongoing SEC and United
      States Attorney’s Office investigations into our accounting for stock option
      grants and an SEC investigation into our accounting for the losses incurred
      by
      NYFIX Millennium. We are currently unable to predict the outcomes and reasonably
      estimate the amounts of loss, if any, with respect to these matters. With
      respect to certain of these matters, we could be subject to penalties, fines
      or
      regulatory sanctions or claims by current and former officers, directors or
      employees for indemnification of costs or losses they may incur and such
      amounts, individually or collectively, could have a material impact on our
      financial condition. In addition, other actions may be brought against us
      related to these matters.




Page
          30




See
      Note
      11 to the Condensed Consolidated Financial Statements included in this Quarterly
      Report on Form 10-Q and Note 9 to our Consolidated Financial Statements for
      the
      fiscal year ended December 31, 2007 filed with our 2007 Form 10-K for a
      description of our commitments and contingencies.




**Seasonality
      and Inflation**




We
      believe that our operations have not been significantly affected by seasonality
      or inflation.




**Off-balance
      Sheet Arrangements**




We
      have
      no material off-balance sheet arrangements, as defined under SEC rules, other
      than those related to the contingent obligations under the convertible notes
      as
      described above and under the terms of our Series B Preferred Stock as described
      in our 2007 Form 10-K.




**Critical
      Accounting Policies and Estimates**




The
      discussion and analysis of our financial condition and results of operations
      are
      based on our condensed consolidated financial statements, which have been
      prepared in accordance with GAAP. The preparation of these financial statements
      requires us to make estimates and judgments that affect the reported amounts
      of
      assets, liabilities, revenues, and expenses and related disclosures of
      contingent assets and liabilities. On an on-going basis, we evaluate our
      estimates, including our allowance for doubtful accounts, inventory valuation
      and obsolescence, long-lived tangible and intangible assets, income taxes,
      and
      contingencies and litigation. We base our estimates on historical experience
      and
      on various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions. In our 2007 10-K, we identified and disclosed
      critical accounting policies, which included revenue recognition, allowance
      for
      doubtful accounts, property and equipment, acquisitions and goodwill,
      capitalized software costs, long-lived assets, income taxes, contingencies
      and
      stock-based compensation. These critical accounting policies affect significant
      judgments and estimates used in the preparation of our financial statements.
      We
      reviewed our policies in conjunction with the preparation of this report and
      have determined that those critical policies remain and have not changed since
      December 31, 2007.





Page
            31





**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**




There
      have been no material changes in our exposure to market risk during the six
      months ended June 30, 2008, from those described in Part II, Item 7A,
      Quantitative and Qualitative Disclosures About Market Risk, included in our
      2007
      Form 10-K.




**Item
      4. Controls and Procedures**




***Disclosure
      Controls and Procedures***




In
      connection with the preparation of this Quarterly Report on Form 10-Q, our
      management, with the participation of our Chief Executive Officer and our Chief
      Financial Officer, carried out an evaluation of the effectiveness of the design
      and operation of our disclosure controls and procedures as of June 30, 2008.
      Disclosure controls and procedures, as defined in Rules 13a-15(e) and
      15d-15(e) under the Exchange Act, are controls and other procedures that are
      designed to ensure that the information that we are required to disclose in
      the
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the SEC’s Rules and
      Forms, and that such information is accumulated and communicated to our
      management, including our Chief Executive Officer and Chief Financial Officer,
      as appropriate to allow timely decisions regarding required disclosure.




As
      disclosed in our 2007 Form 10-K, management and our independent registered
      public accounting firm identified two material weaknesses regarding elements
      of
      our internal control over financial reporting as of December 31, 2007. A
      material weakness is a deficiency or a combination of deficiencies in internal
      control over financial reporting, such that there is a reasonable possibility
      that a material misstatement of the company’s annual or interim financial
      statements will not be prevented or detected on a timely basis. Material
      weaknesses in internal controls may also constitute deficiencies in our
      disclosure controls and procedures.




Based
      on
      the results of this evaluation including the existence of material weaknesses
      in
      our internal control over financial reporting, our Chief Executive Officer
      and
      Chief Financial Officer concluded that our disclosure controls and procedures
      were not effective at the reasonable assurance level as of June 30, 2008.




**Interim
      Measures to Ensure the Accuracy of Financial Reporting**




In
      response to the material weaknesses identified as a result of management’s
      assessment of internal control over financial reporting as disclosed in our
      2007
      Form 10-K, our management, with oversight from our Audit Committee, has
      performed expanded and compensating measures to help ensure the accuracy of
      our
      financial reporting until such time as we are able to remedy all of our material
      weaknesses. Such measures included, among other things:




·
            expansion
                of our period-end closing
                procedures;




·
            enhanced
                monitoring and communications;




·
            additional
                analyses and cross team reviews;




·
            the
                dedication of significant internal resources;
                and




·
            additional
                top-level management reviews of financial information and related
                disclosures.




As
      a
      result of these expanded and compensating procedures, we concluded that the
      consolidated financial statements included in this Quarterly Report on Form
      10-Q
      present fairly, in all material respects, our financial position, results of
      operations and cash flows for the periods presented in conformity with GAAP.




The
      certifications of our principal executive officer and principal financial
      officer required in accordance with Section 302 of the Sarbanes-Oxley Act of
      2002 are attached as exhibits to this Quarterly Report on Form 10-Q. The
      disclosures set forth in this Item 4 contain information concerning the
      evaluation of our disclosure controls and procedures and our internal control
      over financial reporting, referred to in the certifications. Those
      certifications should be read in conjunction with this Item 4 for a complete
      understanding of the matters covered by the certifications.




***Changes
      in Internal Control Over Financial Reporting***




There
      was
      no change in our internal control over financial reporting that occurred during
      the quarterly period ended June 30, 2008 that has materially affected, or is
      reasonably likely to materially affect our internal control over financial
      reporting.




Our
      SOX
      404 Operations & Remediation Committee and members of our finance team
      implemented a number of significant changes to our internal control structure
      during 2007 which resulted in the remediation of numerous previously disclosed
      material weaknesses. For the remaining two identified material weaknesses as
      of
      December 31, 2007 - controls over revenue from historical subscriptions and
      controls related to the acquisition, tracking and disposition of property and
      equipment, we have developed corrective action plans with the goal of completing
      the remediation during 2008. We have completed a number of significant
      milestones in these action plans, however, additional work remains. While we
      believe our ongoing efforts have improved our internal control over financial
      reporting, we have not completed the redesign and/or implementation of all
      necessary procedures and controls or our documentation and testing of the
      processes. Accordingly, we will continue to perform the interim measures
      described above and monitor the effectiveness of our internal control over
      financial reporting in the areas impacted by the material weaknesses discussed
      above.




Page
          32





**PART
      II — OTHER INFORMATION**




**Item
      1. Legal Proceedings**




There
      were no material changes during the three months ended June 30, 2008, with
      respect to the legal proceedings described in Part I, Item 3, Legal Proceedings,
      included in our 2007 Form 10-K.




*Subsequent
      Event*




As
      disclosed in our 2007 Form 10-K, we are named as a nominal defendant in two
      shareholder derivative actions, one pending in Connecticut Superior Court (the
      "Consolidated State Suit") and one pending in the United States District Court
      for the District of Connecticut (the "Consolidated Federal Suit"). These actions
      also name as defendants a number of our former officers and directors, including
      our former Chairman and Chief Executive Officer, another former Chief Executive
      Officer and director, the Company’s former Chief Information Officer, two former
      Chief Financial Officers, our former General Counsel and our former Executive
      Vice President and President of NYFIX Millennium. These actions demand
      unspecified money damages, ask for an accounting and seek rescission of alleged
      misdated options based on, among other things, alleged breaches of fiduciary
      duty, unjust enrichment and breach of contract. Defendants filed motions to
      dismiss both of these matters.   In July 2008, the United States
      District Court for the District of Connecticut dismissed the Consolidated
      Federal Suit and entered judgment in favor of NYFIX and the individual
      defendants. It is unknown whether the plaintiffs will appeal this ruling,
      and the final outcome of the matter cannot be predicted at this time. Neither
      the date of the Connecticut Superior Court's ruling on the motion to dismiss
      the
      Consolidated State Suit nor the outcome of that suit can be predicted at this
      time.




**Item
      1A. Risk Factors**




Other
      than the addition of the following risk factor, there have been no material
      changes during the three months ended June 30, 2008 with respect to the Risk
      Factors described in Part I, Item 1A, Risk Factors, included in our 2007 Form
      10-K.




***We
      may face risks associated with our international expansion that could impair
      our
      ability to grow our international revenues.***




As
      part
      of our strategy to increase our transaction revenues globally, we launched
      our
      Euro Millennium platform in March 2008 for matching U.K. listed equities and
      recently expanded the platform to other European markets, including Belgium,
      France, Germany and the Netherlands. Euro Millennium did not generate meaningful
      revenues during the six months ended June 30, 2008. Significant work remains
      to
      connect new clients and to enhance the electronic trading capabilities of
      existing clients to take full advantage of this platform. We expect continued
      losses related to this initiative during the remainder of 2008, with a loss
      of
      between $2.0 million and $2.5 million expected for the third
      quarter.




In
      addition, our international expansion program will require significant
      management attention and financial resources to successfully develop direct
      and
      indirect international sales and support channels. In addition, we may not
      be
      able to develop international market demand for our products, which could impair
      our ability to grow our revenues. We have limited experience marketing,
      distributing and supporting our products internationally and, to do so, we
      expect that we will need to develop versions of our products that comply with
      local standards. Furthermore, international operations are subject to other
      inherent risks, including:




•  reliance
      on distributors and resellers;


•  greater
      difficulty collecting accounts receivable and longer collection cycles;


•  difficulties
      and costs of staffing and managing international operations;


•  the
      impact of differing technical standards outside the United States;


•  the
      impact of recessions in economies outside the United States;


•  changes
      in regulatory or capitalization requirements, or in currency exchange rates;


•  certification
      requirements;


•  reduced
      protection for intellectual property rights in some countries;


•  potentially
      adverse tax consequences; and


•  political
      and economic instability.




Page
          33




**Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds**




Not
      applicable.




**Item
      3. Defaults Upon Senior Securities**




Not
      applicable.




**Item
      4. Submission of Matters to a Vote of Security Holders**




We
      held
      our 2008 Annual Meeting of Stockholders on June 17, 2008. At the meeting, our
      stockholders voted on the following two proposals and cast their votes as
      follows:





Proposal
      1: To elect (by holders of Common Stock only) the following nominees as
      directors:





Nominee
            
            For
            
            WithheldP.
                Howard Edelstein
            
            30,465,832
            
            1,386,828Lon
                Gorman
            
            30,468,083
            
            1,384,577Mitchel
                A. Lenson
            
            30,438,343
            
            1,414,317Michael
                J. Passarella
            
            30,435,168
            
            1,417,492Richard
                Y. Roberts
            
            30,469,368
            
            1,383,292Thomas
                C. Wajnert
            
            30,458,893
            
            1,393,767





Two
      of
      our directors, Cary J. Davis and William H. Janeway, were elected by holders
      of
      our Series B Preferred Stock (the “Series B Directors”) on June 17, 2008. The
      Series B Directors were not elected by holders of our Common Stock at our Annual
      Meeting.





Proposal
      2: To ratify the appointment of Friedman LLP (“Friedman”) as our independent
      registered public accounting firm for the fiscal year ending December 31,
      2008:





For
            
            Against
            
            AbstainCommon
                Stock
            
            30,307,061
            
            98,540
            
            1,447,059Series
                B Preferred
              Stock
            
            1,500,000
                (or
              15,000,000
                votes)
            
            0
            
            0





Please
      see our Proxy Statement filed with the SEC on April 28, 2008 in connection
      with
      the Annual Meeting for a complete description of the matters voted
      upon.




**Item
      5. Other Information**




Not
      applicable.





Page
            34





**Item
      6.**  **Exhibits**




a.)
            Exhibits




**Exhibit No.**
            
            **Description of Exhibit***31.1
            
            Certification
                of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





*
            Filed
                herewith





Page
            35





**Signatures**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





NYFIX, INC.August
                11, 2008
            /s/ P.
                Howard EdelsteinP.
                Howard EdelsteinPresident
                and
              Chief Executive
                Officer





August
                11, 2008
            /s/ Steven
                R. VigliottiSteven
                R. VigliottiChief
                Financial Officer





Page
            36